Whats the fix for this economy after Obama's bailout? Have you ever seen this movie, "Land of the Dead" by George Romero. Now Economist are using terms like "Zombie banks".
Here's what one Economist say what we must do according to one economist on a Newshows called "Democracy Now!"
ROBERT KUTTNER: Well, my analysis is somewhat different from Mr. Hudson’s analysis. I don’t think this adds up to $12 trillion, and we can have a little debate about that. But I do think that the plan does not go nearly far enough and, in some respects, is just completely wrongheaded.
I think you have to divide what needs to be done into three areas. Number one, we need to refinance mortgages directly so that aid goes directly to homeowners, and the banks and the bondholders who profited from these Mafia loans take the hit, and homeowners stay in their homes. That’s what Roosevelt did in the ’30s with the Home Owners’ Loan Corporation, where the government refinanced mortgages directly. So that’s the first big problem. They haven’t done anything, and the approach they’re taking, when they do get around to it, is wrong, because it bails out bondholders and bankers rather than homeowners.
Secondly, the stimulus is too small by about a factor of three. Just to take one example, state and local governments are going to be out of revenues to the tune of $400 to $500 billion over the next two years. The money in the stimulus package, about $140 billion. So, you know, these are layoffs of teachers and police and fire and cuts in programs that are completely needless. All the government has to do is write a check, and state and local services can continue.
The biggest problem of all is the Geithner plan to try and bring hedge funds and private equity companies with loans from the Federal Reserve as a way of propping up banks. It’s resuscitating the same system that got us into this mess. It’s totally wrongheaded. All of the economists who I respect, from Joe Stiglitz to Paul Krugman to Nouriel Roubini, all argue that, sooner or later, we’re going to have to nationalize the banks, clean out the bad assets, make the bad actors take a hit, replace corrupt management, and clean the slate so that we start out with new—with viable banks that can get the credit system operating again. And the longer we defer that with more pyramid schemes financed by the Fed or the Treasury or the taxpayers, the deeper the hole is.
You asked the question, why we’re not doing it right. The problem is political. On the one hand, Obama has hired a lot of Bob Rubin’s protégés, who aren’t even advocating the right policy. On the other hand, the Republicans are stonewalling him across the board. And so people like Susan Collins, senator from Maine, who are pretty conservative get to block this thing. The only way to end this blockage is for Obama to go to the country and to become a lot more radical, because the times demand radical solutions.
AMY GOODMAN: What’s a zombie bank?
MICHAEL HUDSON: Well, it’s very funny. A zombie bank is supposed to be a bank that has negative equity. And the word “zombie” comes basically from parasitology. Everybody—people often say the financial sector is a parasite extracting. But a parasite does more than that. It doesn’t just take nourishment from the host; it takes over the host’s brain, so the host thinks it’s actually part of the host’s body and, in fact, it’s its child, and it nurtures it. And the financial sector represents itself as being part of the economy. Mr. Geithner, two days ago, said that we can’t have a recovery of the economy without making the banks healthy and whole and profitable. And that’s just the wrong thing.
We can’t have a recovery in the economy until we let the banks take the losses and we let the hedge funds essentially take their losses. There was no need to give $135 billion to AIG, which yesterday was raided by Britain’s office of serious crimes for financial fraud, when the US government refused to move against it for fraud. It’s paying the fraudsters instead of paying the victims, and then it’s blaming the victims as if somehow the bank’s a zombie instead of the bank turning the economy into a zombie economy run by insiders in Washington giving themselves what Bloomberg Financial said was $9 trillion two months ago and two days ago an added two-and-a-half trillion, which, to me, makes up $12 trillion, rounding off.
Read more at Democracy now! http://www.democracynow.org/2009/2/13/robert_kuttner_and_michael_hudson_on
Here's what one Economist say what we must do according to one economist on a Newshows called "Democracy Now!"
ROBERT KUTTNER: Well, my analysis is somewhat different from Mr. Hudson’s analysis. I don’t think this adds up to $12 trillion, and we can have a little debate about that. But I do think that the plan does not go nearly far enough and, in some respects, is just completely wrongheaded.
I think you have to divide what needs to be done into three areas. Number one, we need to refinance mortgages directly so that aid goes directly to homeowners, and the banks and the bondholders who profited from these Mafia loans take the hit, and homeowners stay in their homes. That’s what Roosevelt did in the ’30s with the Home Owners’ Loan Corporation, where the government refinanced mortgages directly. So that’s the first big problem. They haven’t done anything, and the approach they’re taking, when they do get around to it, is wrong, because it bails out bondholders and bankers rather than homeowners.
Secondly, the stimulus is too small by about a factor of three. Just to take one example, state and local governments are going to be out of revenues to the tune of $400 to $500 billion over the next two years. The money in the stimulus package, about $140 billion. So, you know, these are layoffs of teachers and police and fire and cuts in programs that are completely needless. All the government has to do is write a check, and state and local services can continue.
The biggest problem of all is the Geithner plan to try and bring hedge funds and private equity companies with loans from the Federal Reserve as a way of propping up banks. It’s resuscitating the same system that got us into this mess. It’s totally wrongheaded. All of the economists who I respect, from Joe Stiglitz to Paul Krugman to Nouriel Roubini, all argue that, sooner or later, we’re going to have to nationalize the banks, clean out the bad assets, make the bad actors take a hit, replace corrupt management, and clean the slate so that we start out with new—with viable banks that can get the credit system operating again. And the longer we defer that with more pyramid schemes financed by the Fed or the Treasury or the taxpayers, the deeper the hole is.
You asked the question, why we’re not doing it right. The problem is political. On the one hand, Obama has hired a lot of Bob Rubin’s protégés, who aren’t even advocating the right policy. On the other hand, the Republicans are stonewalling him across the board. And so people like Susan Collins, senator from Maine, who are pretty conservative get to block this thing. The only way to end this blockage is for Obama to go to the country and to become a lot more radical, because the times demand radical solutions.
AMY GOODMAN: What’s a zombie bank?
MICHAEL HUDSON: Well, it’s very funny. A zombie bank is supposed to be a bank that has negative equity. And the word “zombie” comes basically from parasitology. Everybody—people often say the financial sector is a parasite extracting. But a parasite does more than that. It doesn’t just take nourishment from the host; it takes over the host’s brain, so the host thinks it’s actually part of the host’s body and, in fact, it’s its child, and it nurtures it. And the financial sector represents itself as being part of the economy. Mr. Geithner, two days ago, said that we can’t have a recovery of the economy without making the banks healthy and whole and profitable. And that’s just the wrong thing.
We can’t have a recovery in the economy until we let the banks take the losses and we let the hedge funds essentially take their losses. There was no need to give $135 billion to AIG, which yesterday was raided by Britain’s office of serious crimes for financial fraud, when the US government refused to move against it for fraud. It’s paying the fraudsters instead of paying the victims, and then it’s blaming the victims as if somehow the bank’s a zombie instead of the bank turning the economy into a zombie economy run by insiders in Washington giving themselves what Bloomberg Financial said was $9 trillion two months ago and two days ago an added two-and-a-half trillion, which, to me, makes up $12 trillion, rounding off.
Read more at Democracy now! http://www.democracynow.org/2009/2/13/robert_kuttner_and_michael_hudson_on
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