Sherman: Fear Fueled Bailout - Video Inside

[simuvac]

Speaking of "Post-9/11 World", since the "financial crisis" is bigger than 9/11, are we now going to have a "Post-Bailout World?"

The talking point on the bailout seems to be that we are now at the end of the Reagan/Thatcher neoliberal cycle of laissez-faire capitalism. It's an interesting claim, because (a) it's bullshit and (b) it suggests to people that the days of runaway greed are behind us, we have entered a more sensible period of economic growth, etc.

In other words, those same greedy warmongering psychopaths who created this mess have learned their lesson and won't do it again.

See also "Savings and Loans Scandal." See also "Enron." See also....

[simuvac]

http://www.nytimes.com/2008/10/05/bu.../PQ4iaCteX2DCw

October 5, 2008
End of an Era on Wall Street: Goodbye to All That

By TIM ARANGO and JULIE CRESWELL
JUST before midnight 10 days ago, as a financial whirlwind tore through Wall Street, someone filched a 75-pound bronze bust of Harry Poulakakos from the vestibule of his landmark saloon on Hanover Square in Manhattan.

Digging into a bowl of beef stroganoff the day after the bust disappeared — it was eventually returned anonymously — Mr. Poulakakos recalled some of the customers who had passed through his doors since he opened his bar, Harry’s, 36 years ago.

Ivan Boesky once had a Christmas party there. Michael Milken worked over at 60 Broad. Tom Wolfe immortalized the joint in “The Bonfire of the Vanities.” Mr. Poulakakos says he even got to know Henry M. Paulson Jr., the former Goldman Sachs chief executive and now the Treasury secretary.

Mr. Poulakakos, 70, has also seen his share of ups and downs on the Street, including the 1987 stock market crash, when Harry’s filled up at 4 p.m. and stayed open all night. But the upheaval he’s witnessing now — much of Wall Street evaporating in a swift and brutal reordering — is, he said, the worst in decades.

“I hope this is going to be over,” he said. “If Wall Street is not active, nothing is active.”

Mr. Poulakakos, rest assured, isn’t planning to disappear. But the cultural tableau and the social swirl that once surrounded Harry’s are certainly fading.

“It’s the beginning of the end of the era of infatuation with the free market,” said Steve Fraser, author of “Wall Street: America’s Dream Palace,” and a historian. “It’s the end of the era where Wall Street carries high degrees of power and prestige. And it’s the end of the era of conspicuous displays of wealth. We are entering a new chapter in our history.”

To be sure, living large and flaunting it are unlikely to exit the American stage, infused as they are in the country’s mojo. But with Congress having approved a $700 billion banking bailout, historians, economists and pundits are also busily debating the ways in which Wall Street’s demise will filter into the popular culture.

It’s an era that traces its roots back more than two decades, when suspendered titans first became fodder for books and movies. It’s an era when eager young traders wearing khakis and toting laptops became dot-com millionaires overnight. And it is an era that roared into hyperdrive during the credit boom of the last decade, when M.B.A.’s and mathematicians raked in millions by trading and betting on ever more exotic securities.

Over all, the past quarter-century has redefined the notion of wealth. In 1982, the first year of the Forbes 400 list, it took about $159 million in today’s dollars to make the list; this year, the minimum price of entry was $1.3 billion.

As finance jockeyed with technology as economic bellwethers, job hunters, fortune seekers and the news media hopped along for the ride. CNBC became must-see TV on trading floors and in hair salons, while people gobbled up stories about private yachts, pricey jets and lavish parties, each one bigger and grander than the last.

Finance made enormous and important strides in these years — new ways to parse risk, more opportunities for businesses and individuals to bankroll dreams — but for the average onlooker the industry seemed to be one endless party.

In 1989, tongues wagged when the 50th birthday celebration for the financier Saul Steinberg featured live models posing as Old Masters paintings. That bash was outdone last year, when Stephen A. Schwarzman, head of the private equity firm Blackstone, feted guests at a 60th birthday party boasting an estimated price tag of $5 million, video tributes and the singer Rod Stewart.

“The money was big in the ’80s, compared to the ’50s, ’60s and ’70s. Now it’s stunning,” said Oliver Stone, who directed the 1987 film “Wall Street” and is the son of a stockbroker. “I thought the ’80s would have been an end to a cycle. I thought there would be a bust. But that’s not what happened.”

Now, with jobs, fortunes and investment banks lost, a cultural linchpin seems to be slipping away.

“This feels very similar, historically, to 1929 and the emotions that filled the air in the months and years that followed the crash,” Mr. Fraser said. “There is a sense of extraordinary shock and astonishment, which is followed by a sense of rage, outrage and anger directed at the centers of finance.”

A WALL STREET hotshot was in a real-estate quandary, and he wanted Barbara Corcoran to help him sort things out.

“This is a finance guy making a ton of money and he was trying to decide whether he should sell the country home in Connecticut, the apartment here in the city or the 8,000-square-foot dream home in Oregon that he just finished,” recalled Ms. Corcoran, who has spent years selling high-end luxury properties to New York’s elite.

Daintily pulling the shell off a soft-boiled egg at a busy restaurant, she said she had fielded call after call from anxious Wall Streeters trying to decide between signing contracts on multimillion-dollar properties or renegotiating because of the downturn. (Renegotiate, she advises.)

But this particular financier, whom Ms. Corcoran declined to identify, was interested in unloading property so he could time the absolute tippy-top of the real-estate market, not because his wallet had thinned.

“He decided to list the country home in Connecticut,” Ms. Corcoran said, shrugging as she bit into her egg.

If there has been one thing that has kept pace with the outsize personas on Wall Street, it’s the gigantic paychecks they’ve hauled in. Since the mid-1980s, top traders, bankers, hedge fund managers and private equity gurus have reeled in millions of dollars in rotten years and tens and hundreds of millions — a handful even making billions — while the good times rolled.

For instance, Steven A. Cohen, a high-profile hedge fund manager who leads SAC Capital Advisors, spent more than $14 million in 1998 for his 30-room mansion in Greenwich, Conn. Then he spiffed up the place with a basketball court, an indoor pool, an outdoor skating rink — with its own Zamboni — a movie theater and showpieces from the art collection on which he has spent hundreds of millions in recent years.

So it’s unlikely that hedge fund stars like Mr. Cohen are headed for the bread lines.

Two weeks ago, as Lehman Brothers filed for bankruptcy, Bank of America rescued Merrill Lynch, and regulators and bankers anxiously tried to figure out how to save the Street from itself, the world’s affluent plunked down more than $200 million in a two-day auction in London, snapping up the latest works by the British artist Damien Hirst.

Still, some will inevitably downsize.

“The yacht is probably the first thing to go,” said Jonathan Beckett, in a telephone interview from Monte Carlo as he attended the annual Monaco Yacht Show last month. Mr. Beckett, the chief executive of Burgess, a yacht broker, said that for the past eight years there have been few sellers in the market.

That is starting to change, said Mr. Beckett, who noted that a handful of yachts had been put up for sale, ranging in price from $10 million to $150 million.

Even party time has shortened.

“In the last couple of weeks, since the bottom fell out of the market, we’ve seen people become more reticent to sign commitments for some expensive venues,” said Joseph Todd St. Cyr, director of Joseph Todd Events, which plans weddings and bar and bat mitzvahs for clients whom he describes as nonshowy, sophisticated Park Avenue types.

“I had one client who was ready to book the Plaza for a wedding, but now he wants to know what are his other options and whether the Plaza will back down on its minimum spending requirement, which runs about $80,000 to $100,000 for a prime Saturday night date,” Mr. St. Cyr said.

“Bar and bat mitzvahs in this town had become a little bit of a show. There’s a little bit of outdoing the Joneses and the Cohens,” he added, noting that typical parties, if devoid of appearances by N.F.L. superstars or the Black Eyed Peas, range from $150,000 to $400,000.

Even though some clients may not have been hurt in the downturn, they simply don’t want to have an overly ostentatious party in this environment, he said.

SHOWY homes are also on the block.

Joseph M. Gregory, Lehman’s president and chief operating officer who was replaced in June, a couple of months before the firm filed for bankruptcy, listed his oceanfront, 2.5-acre, eight-bedroom Bridgehampton home for $32.5 million this summer.

Mr. Gregory could not be reached for comment.

While brokers say they have yet to see an avalanche of high-end sales, they do say that upheaval is present in the minds of buyers.

Once a hamlet for the moneyed old guard, Greenwich has found itself in recent years overrun by flashy hedge fund and private equity managers. But with the markets in flux, some high-end homes with price tags as high as $3 million to $8 million that sat unsold for six months or longer are now being offered as rentals, said Barbara Wells, a local Realtor.

“I had a rental on the market for $11,500 a month. On Monday, we got an offer for $8,500, which we countered with $9,500. They came back with $8,000,” she said. “I told them they were going the wrong way but they said, because of what was happening in the financial markets, this is our new offer. And guess what? The owner accepted it.”

Also shocking, she said, is the fact that some of the new homes offered for rent were houses built on spec.

In all likelihood, the real estate market could be frozen for the next 6 to 18 months or so as buyers and sellers struggle to reach agreement on prices, Ms. Corcoran said.

“The buyers have jumped to the sidelines and the sellers refuse to budge on their prices, completely in a state of disbelief that anything has changed,” she said.

Job losses and lower bonuses are likely to hurt sales of apartments in New York, particularly starter abodes like studios, one bedrooms and basic two bedrooms.

“The lowest-priced properties are always hit hardest first and recover last,” said Ms. Corcoran, who estimates that 20 to 25 percent of apartment buyers in the city work on Wall Street. “The rich have more wiggle room.”

Despite the malaise, she says she sees some hope.

“This feels like 1987,” after the stock market crashed, she declared. “It’s not even close to ’73 or ’74, when people used to feel sorry for you if you told them you lived in New York City.”

That said, Ms. Corcoran said that data she once compiled showed that apartment prices in New York had peaked in 1988, one year after the ’87 crash, and taken 11 years to recover.

Of course, there’s another much-watched barometer of Wall Street buoyancy: traffic at some of the city’s high-end strip clubs.

During the heyday of the Wall Street boom in the 1990s, Lincoln Town Cars, Rolls-Royces and Bentleys were often found idling outside places like Scores. Inside, according to people who were present at the time, groups of brokers routinely dropped $50,000 and even $100,000 in a single night.

In the “presidential suite” at Scores, with its own wine steward who delivered $3,200 bottles of Champagne, the tabs grew quickly.

While dancers may not receive gifts like the ones once lavished upon them — say, a $10,000 line of credit at Bloomingdale’s or a pair of $125,000 earrings — the clubs still appear to be filled with brokers, bankers and foreign businessmen.

On a recent night at Rick’s Cabaret in New York, men in suits and ties were in full force. At around 10 p.m. — early for a strip club — 10 of the club’s 11 private rooms on the second floor were booked.

“Men will never grow tired of the high-class strip-club experience,” said Lonnie Hanover, a spokesman for Rick’s Cabaret International in New York. Rick’s, which is publicly traded on the Nasdaq and has 19 clubs across the country, even plans to expand.

“When times are tough, there is no better form of escapism than a night at a gentlemen’s club,” he added.

IN the early 1980s, Mr. Stone (who gave the world Gordon Gekko and the “Greed is good” mantra in “Wall Street”) spent time in Miami doing research for his movie “Scarface” (with its cocaine-snorting gangster Tony Montana).

When he returned to New York he noticed a shift in the city’s culture of high finance, a world he was familiar with from his childhood. While Wall Streeters weren’t packing guns, other similarities startled him. “What shocked me was I met all these guys who at a young age were making millions and they were acting like these guys in Miami,” Mr. Stone recalled. “There’s not much difference between Gordon Gekko and Tony Montana.”

“Money was worshiped and continues to be worshiped,” Mr. Stone added. “Maybe that will change now.”

Adoration of riches is hardly new, however. In the mid- to late 19th century, the Gilded Age — a term Mark Twain coined in 1873 — offered equally ostentatious displays of wealth and a broadening gulf between rich and poor.

“In the Gilded Age, they built great, enormous palazzos in Newport that they lived in for six weeks a year,” said the historian John Steele Gordon, whose book, “An Empire of Wealth,” chronicles that era. “During the last 25 years, it’s certainly been a gilded age in the sense that enormous fortunes have been built up in an unprecedented way.”

Part of Wall Street’s allure for the young and ambitious was that anyone — regardless of education or breeding — could hit it big and live like a kingpin.

Consider, for instance, Jordan Belfort.

In 1987, Mr. Belfort, then a down-on-his-luck former meat-and-seafood distributor, was standing outside an apartment building in Bayside, Queens, when a childhood acquaintance who worked on Wall Street pulled up in a Ferrari.

“This was a guy who you never would have expected would be making this kind of money,” Mr. Belfort recalled in a recent telephone interview. “I was broke, broke, broke, down to my last $100.”

Mr. Belfort hit the Street in the late 1980s, and he recounted his adventure last year in a book called “The Wolf of Wall Street,” which he published after serving almost two years in prison for securities fraud and stock manipulation. He recently finished a second installment, “Catching the Wolf of Wall Street,” to be released in February.

When he first struck it rich, he followed a well-trodden path for Wall Street upstarts.

“First thing I did was go out and buy a Jaguar,” he said. “Step One is you get the car. Step Two, you get a great watch. Then great restaurants, and then maybe a place in the Hamptons — a summer share with another broker.”

Whatever the Street’s excesses, it did offer individuals and institutions reliable, sophisticated and often efficient ways to trade and invest, helping to spread some of the wealth.

Markets were democratized as individuals who had never before bought a stock or bond dabbled in investing, even if that meant simply plunking down money in a mutual fund, or participating in their company 401(k) plans.

New technologies and the ability to trade stocks cheaply opened the financial doors to more people. As home prices rose, meanwhile, homeowners were enticed to tap into their new wealth through home equity loans and then used that money to pay for their own version of a lavish lifestyle.

DESPITE these gains in the middle class, though, the truly wealthy have pulled away from the pack. Not since the late 1920s, just before the 1929 market crash, has there been such a concentration of income among individuals and families in very upper reaches of the income spectrum, according to researchers at the University of California, Berkeley, and the Paris School of Economics.

Some say that anger over the yawning wealth divide found traction in the highly charged and polarizing debate in Congress over the bailout bill.

Mr. Fraser, the historian, says that anger is informed by the de-industrialization of the American economy in recent decades. Factory closings and the loss of manufacturing jobs that paid decent, middle-class wages coincided with the heady expansion of the financial sector, where compensation soared.

“That means that people in Ohio and Pennsylvania have not been living as high on the hog as those on Wall Street,” Mr. Fraser said. “There’s a real sense of anger at that unfairness.”

Even if the current crisis leads to a prolonged slowdown, people may still flock to finance jobs. But they may have to recalibrate their expectations.

“There’s no question that people on Wall Street are going to make less money,” said Jonathan A. Knee, a Columbia Business School professor and author of “The Accidental Investment Banker.”

Like any cultural force concerned about its legacy, the financial world has a custodian of its past. On Wall Street, it can be found at the Museum of American Financial History, just a block from the New York Stock Exchange.

Located in a grand space once occupied by the Bank of New York, it features a long timeline charting major market events. The last event it notes is the popping of the dot-com bubble earlier this decade.

Robert E. Wright, a financial historian at New York University who is a curator of the museum, said that there were still many unknowns about how recent events would be recalled.

“If the economic system shuts down and we go in for a deep recession, it probably is the end of an era,” he said.

Hedging its bets, the museum has already started collecting mementos from the current crisis to post on its wall.

[simuvac]

http://www.telegraph.co.uk/finance/f...Bloomberg.html

Global credit crisis is like 9/11, says New York Mayor Mike Bloomberg

The credit crisis that is sweeping global financial markets is akin to the 9/11 terrorist attacks, according to the Mayor of New York Mike Bloomberg.

In a speech in London, Mr Bloomberg said that the global economy was "facing the worst confidence crisis in our lifetime", adding that "the pain is going to be spread far and wide".

He told an audience in the City of London: "It is going to affect anyone who wants to borrow money to buy a car or a house or to expand their business or take out a student loan.

"Millions of people are just not going to be able to do those things - and millions of people who carry a balance on their credit cards are going to see their costs go up, or their credit limits slashed.

"There's no sugar coating this - it's bad. And it's only going to get worse as more and more jobs are lost."

Mr Bloomberg said that he hoped that comparisons with the Great Depression were "grossly overstated", especially when it came to working out what to do next.

But Mr Bloomberg, who was speaking after receiving the Freedom of the City of London, compared the severity of the crisis to the impact of the terrorist attacks on New York on 6 September 2001.

He said: "The better analogy to make - at least in terms of how we should be thinking about our next steps - might be to a terrible crisis that is far more recent: the attacks of September 11th."

The 9/11 terrorist attacks showed that cities and countries had to work more closely together to prevent future problems, setting up early warning systems and encouraging a transparent flow of information.

Cities like London had to make their own moves to minimise the risks from a major economic shock - and not wait for national governments to do the job for them, he said.

Mr Bloomberg said that "there's no doubt that the months ahead are going to be awfully difficult".

He said: "It would be nice to believe that the financial crisis is only a problem for bankers - and that taxpayers shouldn't bail them out. But that's the same kind of wishful thinking that got us into this mess in the first place."

Speaking at a press conference ahead of last night's speech, Mr Bloomberg stressed that the downturn was not likely to be long term.

He said: "If it rains today I am disappointed that I cannot go out and play golf but I still think my golf game is good and that is what it is likely to be.

"We have a short term crisis that we have to address. If we don't it could lead to something much longer."

[Gold9472]

Good little collection... keep it up.

[simuvac]

Good little collection... keep it up.

Thanks. This little meme has legs, baby!

[simuvac]

http://economictimes.indiatimes.com/...ow/3572068.cms

'Economic 9/11' exacting grim psychological toll in US

8 Oct, 2008, 0718 hrs IST, AGENCIES

LOS ANGELES: The murder-suicide of a Los Angeles financial manager who shot dead five members of his family before killing himself has highlighte
d the psychological toll of the economic meltdown.

The bodies of Karthik Rajaram, a 45-year-old business school graduate, and his wife, three children and mother-in-law, were discovered at his home in an upmarket gated community on Monday.

In a letter to police, Rajaram said he had been driven to murder because of his dire economic situation: already unemployed for several months, his remaining finances were reportedly wiped out by Wall Street's collapse.

Rajaram's tragic case has become a grim symbol of the US financial crisis. Or as Los Angeles deputy police chief Michael Moore put it, "a perfect American family destroyed by a man stuck in a rabbit hole of absolute despair."

The Los Angeles case came less than a week after a 90-year-old woman in Ohio shot herself as she was about to served an eviction notice on the home she has lived in for the past 38 years.

The two harrowing incidents have drawn attention to the mental-health impact associated with the most serious US financial crisis since the Great Depression of the 1930s, experts say.

Chicago-based psychologist Nancy Molitor told AFP the numbers of people seeking help because of finance-related anxiety had skyrocketed. "In my 20 years of practice I have never seen anything like this, the anxiety is through the roof," Molitor said, estimating she had seen a 50-percent increase in volume of calls.

The sense of bewilderment caused by financial crisis was comparable to the effect of the September 11, 2001 terrorist attacks, Molitor said, impacting people of varying ages and backgrounds.

"This compares to 9/11 in terms of the impact, definitely. And it's significant that it isn't a Wall Street crisis as I see it -- it's affecting the entire consumer economy, and almost every individual that I see.

"It's not just affecting adults, it's affecting the children. I had one 14-year-old who came to see me and said 'I'm worried my parents are going to go broke, because they're arguing more.'

"It's filtered down to almost every household I deal with. I've never seen something that has affected such a wide range of people."


Molitor said the problems varied greatly: affluent people who had lost a million dollars; couples fretting over the ability to pay for college tuition, or in one case, a 79-year-old woman who "couldn't afford to die."

"I thought she was kidding," Molitor said. "But she told me 'I used to have a pretty good inheritance that I could leave my three children. If I die tomorrow they're going to get half of what they were going to get.'"

Judith Bardwick, a professor of clinical psychiatry at the University of California, San Diego, said the tidal wave of grim economic headlines had exacerbated widespread feelings of impotence in an era of job insecurity.

"It is a sense of fear, depression and anxiety that says no matter how hard or well I work, I have no control over my future," Bardwick said. "So the present stinks and the future will be worse. And there's no one to help me.

"In a period of fiscal crisis, in which very visibly major institutions fail or are bailed out, and the market is riding a rollercoaster, the number of people who have these despairing views of life will naturally increase."

The fact that the macroeconomic causes of the meltdown were not easily explained added to the sense of impotence, Molitor said. "It's a perfect storm because what breeds anxiety is a fear of the unknown," she explained. "I had a very bright person with a PhD in economics who said to me 'Even I don't get it. And if I don't get it, how is the average person managing a household supposed to get it?'"

"There's a sense of total helplessness, which if it goes on long enough becomes hopelessness. And if that goes on long enough it becomes depression."

In Los Angeles, authorities are urging anyone in despair to seek professional help immediately. Ken Kondo, a spokesman for the Los Angeles County Department of Mental Health, said a 24-hour service was available for anyone seeking help.

"One in five people in the United States will experience mental illness and these stressors from the economic crisis could trigger that," Kondo said.

"What we're saying is that people should talk to friends and family members, don't try and handle it by yourself. And if they feel chronically depressed or suicidal, seek professional mental health help right away."

[Gold9472]

America's financial 9/11

http://www.nation.com.pk/pakistan-ne...-financial-911

By IRFAN ASGHAR October 4, 2008

There are certain eternal verities and inviolate precepts of nature which regulate the functioning of this universe. These principles are no respecter of persons and everything under the sky is subject to the long arm of these principles. The kernel of these principles is respect for humanity. Whenever anyone, be it an individual or a nation, acts in contravention of these verities by giving short shrift to the respect for humanity, the nature crushes him or it under its ruthless and razor-sharp wheels.

The plight of America is a case in point. Back in the days, America was quoted as a byword for human rights and democratic or egalitarian attitudes. But no sooner had America started polishing off humanity and committing crimes against it by establishing Guantanamo Bay and Abu Gharib than its supremacy began to wane.

The gravest financial crisis which has infected the US economy about two weeks ago is a presage of the fact that US hegemony is going to wither away.

Currently, America is in the toils of a financial crisis of diabolical proportions which is the worst one since the Great Depression of the 1930s and its government has been sucked deep into the maelstrom of its capitalist industry. This financial crisis has stood out like a sore thumb with many manifestations like choked-off credit lines, massively leveraged firms, assets gone bad, sinking mortgages, panicked consumers and paralysed companies. This credit crunch, which owes its origin to a meltdown in US home prices after a frenzied boom fuelled by easy credit, has led to the collapse of two investment banks including the venerable Lehman Brothers and the government bailout of housing agencies Fannie Mae and Freddie Mac and insurance giant AIG. Problems that originated in the credit markets and first showed up in the area of sub prime mortgages have fanned out throughout the financial system.

In order to get the picture precisely, let us discuss the aetiology of this financial crises. On having sober reflection, three factors stand out as the prime reasons for this. To start with, it is the free market principles with proxy regulation system that have nibbled away at the basis of US financial sector. This crises is the upshot of too much debt, after governments and central banks failed to constrain the credit expansion of the early years of this decade. Bankers then irresponsibly exploited the opportunities held out by an easy credit regime. Wall Street inflamed the demand for high investment products in an era of low interest rates - hence the attraction of the sub-prime mortgage market. The traditional regulated banking system was pushed aside by Wall Street's new financial Ferris wheels who created their own money in the form of complex securities and furiously traded these exotic instruments. Wall Street heavy hitters grew fabulously rich by simply passing around paper. Inflated or semi-worthless securities increased in bogus value at each stage of the trading process.

Secondly, one of the reasons of this crisis resides in the unconscionable cost of America's foreign involvement. US can ill-afford to fork out two billion a month for the Iraq war. Much of Iraq war's debt has been financed by foreign investors that can't continue much longer.

Thirdly, it is the incapability of the Bush administration which has led the situation go downhill to this point. This financial crisis will be the last nail in the coffin of Mr Bush.

In order to give a leg-up to the economy, the US administration scrambled and buzzed around in a bid to have an unprecedented $700 billion bailout plan. If we have an analysis of the plan, this is fatally flawed. Firstly this plan gives untrammelled powers with no supervision to the Treasury Secretary. Secondly US government's $700 billion bailout plan will be an excessive burden on taxpayers. Thirdly, the US economy cannot afford extra-debt. Fourthly, this plan will not be sufficient enough to the rescue of sinking economy. Fifthly, this plan marks a stark shift from the support of deregulation and smaller government that has guided economic policy over the last few decades in the US.

This bailout plan has brought to light US double standards in financial respects also. The US upbraided Asian economies for making a fist of bailing out cash-stepped companies during the 1997-98 Asian financial crisis and asked them to let inefficient companies and corporations bleed to death. But now it is throwing a lifetime to its companies ravaged by a credit crisis.

[Gold9472]

He Told Us To Go Shopping. Now The Bill Is Due.

http://www.washingtonpost.com/wp-dyn...100301977.html

By Andrew J. Bacevich
Sunday, October 5, 2008; Page B03

It's widely thought that the biggest gamble President Bush ever took was deciding to invade Iraq in 2003. It wasn't. His riskiest move was actually one made right after the Sept. 11, 2001, terrorist attacks when he chose not to mobilize the country or summon his fellow citizens to any wartime economic sacrifice. Bush tried to remake the world on the cheap, and as the bill grew larger, he still refused to ask Americans to pay up. During this past week, that gamble collapsed, leaving the rest of us to sort through the wreckage.

To understand this link between today's financial crisis and Bush's wider national security decisions, we need to go back to 9/11 itself. From the very outset, the president described the "war on terror" as a vast undertaking of paramount importance. But he simultaneously urged Americans to carry on as if there were no war. "Get down to Disney World in Florida," he urged just over two weeks after 9/11. "Take your families and enjoy life, the way we want it to be enjoyed." Bush certainly wanted citizens to support his war -- he just wasn't going to require them actually to do anything. The support he sought was not active but passive. It entailed not popular engagement but popular deference. Bush simply wanted citizens (and Congress) to go along without asking too many questions.

So his administration's policies reflected an oddly business-as-usual approach. Senior officials routinely described the war as global in scope and likely to last decades, but the administration made no effort to expand the armed forces. It sought no additional revenue to cover the costs of waging a protracted conflict. It left the nation's economic priorities unchanged. Instead of sacrifices, it offered tax cuts. So as the American soldier fought, the American consumer binged, encouraged by American banks offering easy credit.

From September 2001 until September 2008, this approach allowed Bush to enjoy nearly unfettered freedom of action. To fund the war on terror, Congress gave the administration all the money it wanted. Huge bipartisan majorities appropriated hundreds of billions of dollars, producing massive federal deficits and pushing the national debt from roughly $6 trillion in 2001 to just shy of $10 trillion today. Even many liberal Democrats who decried the war routinely voted to approve this spending, as did conservative Republicans who still trumpeted their principled commitment to fiscal responsibility and balanced budgets.

Bush seems to have calculated -- cynically but correctly -- that prolonging the credit-fueled consumer binge could help keep complaints about his performance as commander in chief from becoming more than a nuisance. Members of Congress calculated -- again correctly -- that their constituents were looking to Capitol Hill for largesse, not lessons in austerity. In this sense, recklessness on Main Street, on Wall Street and at both ends of Pennsylvania Avenue proved mutually reinforcing.

For both the Bush administration and Congress, this gambit has turned out to be clever rather than smart. The ongoing crisis on Wall Street has now, in effect, ended the Bush presidency. Meanwhile, a month before elections, panic-stricken members of Congress are desperately trying to insulate Main Street from the effects of that crisis -- or at least to pass the blame onto someone else.

But in less obvious ways, the economic crisis also renders a definitive verdict on the country's post-9/11 national security strategy. The "go to Disney World" approach to waging war has produced large, unanticipated consequences. When the American people, as instructed, turned their attention back to enjoying life, their hankering for prosperity without pain deprived the administration of the wherewithal needed over the long haul to achieve some truly ambitious ends.

Even today, the scope of those ambitions is not widely understood, in part due to the administration's own obfuscations. After September 2001, senior officials described U.S. objectives as merely defensive, designed to prevent further terrorist attacks. Or they wrapped America's purposes in the gauze of ideology, saying that our aim was to spread freedom and eliminate tyranny. But in reality, the Bush strategy conceived after 9/11 was expansionist, shaped above all by geopolitical considerations. The central purpose was to secure U.S. preeminence across the strategically critical and unstable greater Middle East. Securing preeminence didn't necessarily imply conquering and occupying this vast region, but it did require changing it -- comprehensively and irrevocably. This was not some fantasy nursed by neoconservatives at the Weekly Standard or the American Enterprise Institute. Rather, it was the central pillar of the misnamed enterprise that we persist in calling the "global war on terror."

At a Pentagon press conference on Sept. 18, 2001, then-defense secretary Donald H. Rumsfeld let the cat out of the bag: "We have a choice, either to change the way we live, which is unacceptable, or to change the way that they live, and we chose the latter." This was not some slip of the tongue. The United States was now out to change the way "they" -- i.e., hundreds of millions of Muslims living in the Middle East -- live. Senior officials did not shrink from -- perhaps even relished -- the magnitude of the challenges that lay ahead. The idea, wrote chief Pentagon strategist Douglas J. Feith in a May 2004 memo, was to "transform the Middle East and the broader world of Islam generally."

But if the administration's goals were grandiose, its means were modest. The administration's governing assumption was that the U.S. military, as constituted in late 2001, ought to suffice to transform the Middle East. Bush could afford to tell the American people to go on holiday and head back to the mall because the indomitable American soldier could be counted on to liberate (and thereby pacify) the Muslim world.

For a while, that seemed to work: The Taliban fell quickly, with little need for the U.S. taxpayer to shell out for a larger military. But the Bush team turned quickly to Iraq, hoping to demonstrate on an even grander scale what the determined exercise of U.S. power could achieve. This proved a fatal miscalculation. After five and a half years of arduous effort, Iraq continues to drain U.S. resources on a colossal scale. Violence is down, but expenditures are not. An end to the U.S. commitment is nowhere in sight.

The achievements of Gen. David H. Petraeus notwithstanding, the primary lesson of the Iraq war remains this one: To imagine that the United States can easily and cheaply invade, occupy and redeem any country in the Muslim world is sheer folly. That holds true in Afghanistan, too, where the reinforcements that Gen. David D. McKiernan, the recently appointed U.S. commander, says he needs to turn things around will be unavailable until at least next spring.

Yet there is an economic lesson here too. "We have more will than wallet," the president's father said in 1989 during his own inaugural address. That is again painfully true today. The 2008 election finds the Pentagon cupboard bare, the U.S. Treasury depleted, the economy in disarray and the average American household feeling acute distress. Profligacy at home and profligacy abroad have combined to produce a grave crisis. This time around, telling Americans to head for Disney World won't work. The credit card's already maxed out, and the banks are refusing to pony up for new loans.

It's not surprising that people don't cotton to the idea of spending $700 billion to bail out Wall Street. Nor should they find it acceptable to spend as much as that, or more, to perpetuate a misguided and never-ending global war. But like it or not, the bill collector is pounding on the door. Bush's parting gift to the nation will be to let others figure out how to settle accounts.

[simuvac]

http://www.guardian.co.uk/politics/2...nomy-nickclegg

Nick Clegg warns of 'economic 9/11'

Nick Clegg today warned of an "an economic 9/11" as he suggested that the crisis in the financial markets could breed conflict, instability and nationalism. The Liberal Democrat leader called on the EU to "step up to the plate" as he criticised European governments for being slow to produce coordinated action amid a crisis whose risks were "borderless and global".

Recalling the Great Depression of the 1930s, which created the conditions for the resurgence of fascism and the outbreak of the second world war, Clegg said that he was infuriated that the generation of leaders now running Europe failed to understand that nationalism and protectionism fuelled instability.

Extremists might find sympathy among groups who felt themselves victims of "economic injustice", the former MEP warned.

In a speech made hours after the British government announced a £37bn bail-out of the banking sector, and following a weekend in which European governments agreed a coordinated package of measures to deal with the financial crisis, Clegg said the financial collapse could become the "engine of global insecurity" in the months and years ahead.

Clegg told an event organised by the Institute for Public Policy Research that united efforts to stabilise the global economy would prevent a gap opening up in which "extremists can compete".

"In our world, economic strength is power," said Clegg. "We do not yet know, when the dust settles from this crisis, where the power will lie. The financial collapse we are caught in may prove to be an economic 9/11.

"9/11 was a security crisis, with security implications. This is an economic crisis, but its economic and social-security implications are potentially no less profound."

Clegg said that the British bank bail-out announcement earlier today, which will see the government take a controlling stake of up to 60% in the Royal Bank of Scotland, in return for up to £20bn from the taxpayer, would hopefully begin to stabilise the market.

But he called for a greater "political will" within the European Union to provide supranational responses to a supranational crisis.

Germany, France, Italy and a further 12 European countries in the eurozone last night unveiled a comprehensive plan for salvaging their banking systems from potential ruin.

Clegg said today that the coordinated action at EU level, which he said had been "slow in coming", would have to be followed by more radical action, such as interest-rate cuts and more aggressive intervention, to remove the "massive toxic liabilities" at the heart of the banking system.

"We have seen European leaders agree to work together with their counterparts one day, only to take unilateral action the next," he said.

"Eurosceptics have argued, and will continue to argue, that Europe has little to offer at this time of financial crisis, that this is an Anglo-American problem that needs an Anglo-American solution. They are wrong."

Outlining a five-point multilateral approach to tackling the crisis, Clegg said that European countries ought to work to tackle inequality to avoid extremism.

"Extremists target vulnerable and marginalised groups," he said.

"They will only find sympathy for their cause if disaffected groups feel that economic injustice has pushed them right to the edge."

He rounded on European heads of government such as Brown, Angela Merkel, Silvio Berlusconi, and Nicolas Sarkozy, who he said did not "instinctively" share the values that European cooperation was built on.

"Their predecessors, the architects of the European Community, were driven by the traumas of world war two," said Clegg.

"They understood the need for national sacrifice for the wider ideals of peace, prosperity and democracy.

"They knew only too well that nationalism and protectionism fuel instability. But their successors need to learn these lessons anew. No one more so than Gordon Brown. Yes, he is calling for a unified European response to the crisis now and I support that, but it shouldn't have taken disaster to convince him that European coordinated action can be the only way forward. It infuriates me, as a politician with a lifelong commitment to Europe."

Clegg also warned that America's "enemies" might seek to capitalise on the superpower's economic woes.

The country had already lost its moral credibility due to the war in Iraq, he said. Now it risked losing its economic credibility too.

Listing North Korea, Russia and Venezuela, Clegg said that the American "empire" had many enemies waiting at its gate who "may seek to capitalise on the present upheaval".

Other proposals outlined by Clegg today as part of his five-point plan to restore economic security across the globe included overhauling global financial structures, such as the World Bank, building a green economy across Europe, a clear EU decision to avoid the lure of economic protectionism in response to the current turmoil, and a new regulatory framework for financial institutions across Europe.

[Gold9472]

Crisis could be an "economic 9/11", warn Lib Dems

http://www.moneymarketing.co.uk/cgi-...40&h=341&f=342

Leah Milner - 14-Oct-2008

Liberal Democrat leader Nick Clegg has warned that the financial crisis could become an “economic 9/11”.

In a speech at the Institute for Public Policy Research yesterday Clegg said the banking crisis could breed conflict and instability and push democracies into narrow nationalism.

He said: “In our world, economic strength is power. We do not yet know, when the dust settles from this crisis, where the power will lie. The financial collapse we are caught in may prove to be an economic 9/11.

“9/11 was a security crisis, with security implications. This is an economic crisis, but its economic and social security implications are potentially no less profound.”

Clegg welcomed the Government’s £37bn bail-out plan, and called for a “sea change” in the financial services industry bonus culture and for European leaders “step up to the plate”.

He added: “This crisis has proved that in our globalised world chains of cause and effect have no regard for territorial integrity.”