Robert Ganshorn

One Little Capitalist Segment

Filed By Robert Ganshorn | October 03, 2008 9:00 AM | comments

Filed in: Living, Politics, Politics
Tags: bailout package, banking crisis, economic bailout, GM, Honda, Nissan, Toyota, Wall Street, Wall Street bailout

In my last posting I tried to cover too much and I apologize for that. I attempted to link the intense suffering of the 25% of the world's population (who may yet starve to death) to the importance of the health of our enormous American economy. Our prosperity remains the envy of the world, and if you doubt, it is OK with me.

So, this time let's talk about only something that affects you in America (since from the response I got on last weekend I would have to presume that no one cares about anything else). I do hope that I am wrong in that assumption.

The automobile industry in the United States is on it's knees and I can't say they do not deserve a big portion of their problems. They gave Americans the kinds of vehicles they wanted to buy instead of what they should be driving and they knew it. Greedy Americans knew it too, but they selfishly chose to live in the moment or denial. I am not talking about just GM, Ford, and Chrysler, but Toyota, Nissan, Honda and all import brands. The many collective billions they have spent in research and development of hybrids, hydrogen and "all electric" vehicles could well go completely to waste or be delayed for decades until they are implemented - which will compound our problems further.

You breathe air, and as I ended my last posting with: "I hope we can open our eyes and do better," I hope you can allow that this is part of doing better.

If you doubt that it is true, you should be informed that the innovation of television was first delayed by the Depression and then WWII priorities. We could read books and listen to radio for fifteen more years, but we can hardly wait that long to breathe and have the next human made environmental impact.

I do not care how many automobiles are purchased with the use of retail credit. General Motors does not have corporate credit available to it right now. Healthy American companies (not GM) are paying more for credit use to fund daily business operations than they were two weeks ago and that is a great problem. A bigger problem is that small and medium sized businesses cannot get a loan and they are the greatest employers of Americans by number. If the House of Representatives had passed the bill they should have passed on last Sunday the Senate would not have just passed its version with an extra 180 billion in "sweetening" which we might just as well call Christmas tree lights.

The only good news is the raising of the ceiling on FDIC insured deposits to $250,000.00.

Without a vibrant banking system loaning money between themselves, us and business we cannot anticipate an improving future. By burying your money in the back yard you are stealing liquidity in the economy that it needs while you put your assets at risk of theft or fire. This and rumors of ATM machines running out of money permanently are the type of nonsense to be avoided.

I think some people might like economic collapse so that they can puff themselves up and suggest that:

You deserve this because you did not follow the "pure" tenants of capitalism, socialism, unionism, anarchy, or wiccanism.

We Americans steal all the good stuff and argue about how it is distributed among us.

War, greed, fear, violence, militarism, racism, famine, flood and other fun things.

A valued correspondent of mine said this to me recently: "They complain about straights, but they are no more intelligent or tolerant of other points of view themselves. They are just as obnoxious and dense."

I hope not. I hope everyone who participates in Bilerico does something great for themselves and others.


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It's ridiculous to suggest that anyone wants an economic collapse to puff themselves up.
Perhaps this article can bring some clarity to what you think will be a "vibrant banking system".

Paulson's Reasons for Delaying Day of Reckoning: Jonathan Weil

Commentary by Jonathan Weil
Oct. 2 (Bloomberg) -- If you think this bailout is expensive, just wait until you see the next one.

The $700 billion rescue plan approved by the U.S. Senate won't fix the core problem with the nation's ailing financial institutions. And it almost guarantees that you and I will have to pony up for an even costlier bailout someday, maybe soon, if the House of Representatives passes it tomorrow.

Treasury Secretary Hank Paulson has correctly identified the quandary: Lots of shaky banks and insurance companies are showing strangely high values for assets that aren't worth squat in the market. Many need more capital and can't raise it. And he's right in saying the outlook is grim if we don't get this fixed.

What's stunning is how little the taxpayers would get in return for their money under Paulson's package, and how illusory much of the banks' newly minted capital would be.

Under the plan, Treasury would buy some companies' troubled assets at above-market values. To boost their capital, Paulson would have to pay the companies more than what their balance sheets say the assets are worth. Then other companies would use the rigged prices to write up, or avoid writing down, the values of similar holdings on their own books.

So, the taxpayers get hosed on the asset purchases. Other banks use the trumped-up prices to cook their books. And investor confidence supposedly is restored.

That brings us to this question: Why would a smart guy like Hank Paulson -- the former boss of Goldman Sachs -- advance such a dumb, shady plan? Let us count the reasons:

No. 1: It delays our national reckoning until after the presidential election.

Paulson first floated a bailout Sept. 18, at the very hour when shares of Goldman Sachs Group Inc. and Morgan Stanley looked like they might go into a death spiral. It's not so much a bailout, as it is a timeout. He had to follow up with something, anything, to stop the freefall from resuming. It didn't have to make sense.

So it doesn't. The plan is about creating the illusion of stronger financial institutions, not strengthening them.

The banks know this. Otherwise, they would have stopped charging each other near-record rates for three-month loans by now. The reason they haven't is because they're still afraid their customers -- other banks -- might go broke.

No. 2: The reckoning will be worse than you can imagine.

If Paulson were serious about recapitalizing rickety U.S. banks, he would infuse them with hundreds of billions of dollars of fresh government money, in exchange for ownership stakes. And if he wanted to create market liquidity for all those troubled assets on their books, he would be ordering banks to disclose everything there is to know about them, so Mr. Market could figure out their present value.

He can't let that happen. Not now. If everyone could see how much the toxic waste is worth, the writedowns would be so huge that many banks would have to be declared insolvent.

Better to let the next administration deal with the clean- up. The trouble is, the longer the government waits to address the banks' lack of capital, the worse it gets, barring a miracle.

No. 3: He's helping his friends.

Is there any doubt? Let's see.

As of yesterday, Morgan Stanley Chief Executive John Mack owned 2.75 million shares of his company's stock, valued at about $67 million. If Mack can get Morgan Stanley to trade reams of sketchy paper for billions of dollars of our Treasury's cash, without diluting any of his stake in the company, who benefits?

Paulson would have us believe it's you.

No. 4: There's an excellent chance the Congress will pass it. Leave someone else to figure out the costs another day.

(Jonathan Weil is a Bloomberg News columnist. The opinions expressed are his own.)

To contact the writer of this column: Jonathan Weil in New York at jweil6@bloomberg.net

Robert Ganshorn Robert Ganshorn | October 3, 2008 11:56 AM

Mr. Merrill,

I hope you look at the link to my last posting to see what I was up against last week end.

If Hank Paulson were really so good, would he have not kept all cheery and bright through the election? Were not banks making record profits 18 months ago?

The man is good at running a business, but pathetic at running an economy. I believe he has made the greatest error of hubris...he believed his own lies.

You strike me as a person who is a fellow believer in market capitalism. You are a student of the markets and I can tell as much by your other comments elsewhere. In my previous posting, which I hope you read, you will observe my concern about the bottom 25% of humanity. Fellow human beings who are living on the edge of survival. That is why I made this posting today.

My remarks above were only a portion of the attacks received for attempting to save Americans from themselves (albeit in a small way) because the 25% of humanity that is at death's door while some folks are lamenting having to give up Starbuck's.

Hey Charles, that's a good point, but please link us to the clip instead of copying and pasting. (Readers complain about really long comments that are copy and paste jobs - right, Bill?) I figured I'd sneak in a quick warning before one of our not-as-nice readers gets bent out of shape.... LOL

Bill Perdue Bill Perdue | October 4, 2008 12:47 PM

Bil, I think the objections are often to the politics, not the quotes. I've also heard from one contributor in a series of e-mails that my comments are too long and that no one reads them, but I know for a fact that people read them and often like them. Except for some partisans who think I'm the anti-Obama.

Here's something we can probably agree on. The internet is the last and the best free speech forum in the US. Most of the media is owned by the rich, and most of the opinion makers too. They churn out vast amounts of lies, propaganda and spin and to counter it often requies some detail. Forums like Bilerico are invaluable tools to couter that.

Right, Bil.

I agree about the importance of forums like this. But it is true that really long comments tend to get skipped over. Sadly, I often skim your comments when they stretch beyond a screen length. Using a large clip (or entire article) from elsewhere though tends to get us in trouble with copyright issues. We've had to remove a couple of comments that were direct copy and pastes of other articles at the original author's request.

Bill Perdue Bill Perdue | October 5, 2008 1:39 AM

Everybody skims Bil. I have to because of the sheer volume I read and also because a have a fair idea what most people will say.

Robert, your willingness to deliver a bitter message is laudable, but you must realize that only a certain percentage --- unfortunately, perhaps a rather small percentage --- of your audience is ready or willing to hear it. When Obama (or God forbid, McCain) have to deliver the same message, he will be met with the same rile. God help him (either one).

Now, I think I get what you are saying, and I have heard it from a few other sources as well, particularly from author Kevin Phillips: Essentially, Americans are addicted to cheap goodies, and buying their cheap goodies now instead of tomorrow, and on credit instead of using real cash that they have already earned. The American politicians know this, and they also know that the American voter will be infuriated at the mere suggestion that he should get financially well again by going thru "goodie withdrawl" --- quit buying all those goodies and teach yourself how to put real money into savings again. Any politician that delivers that message without a sugar coating an inch thick is not likely to survive the next election. As incredibly productive as the American worker is, he (or she) still manages to spend more money than he or she brings in.

Now, on first glance, there might not seem to be much difference between what I just said, and what you, Robert, just said ("25% of humanity that is at death's door while some folks are lamenting having to give up Starbuck's"), and what Phil Graham said earlier this summer, that Americans are a bunch of whiners. Well, calling us "a bunch of whiners" is oversimplifying to the extreme, but it is true that we need to face up to some painful realities if we are to get ourselves out of this mess in a non-cataclysmic way. Next time around, newlyweds Dick and Jane might need to buy a little three-bedroom bungalow in Fresno instead of immediately grabbing the house of their dreams, a 5000-sq-ft bohemoth in Sausalito.

And even so, the path is not clear because our leaders are sending mixed messages. They tell us to spend to "stimulate the economy" and then they tell us to save to provide liquidity for the financial markets. I don't know about you, but the dollars that I receive cannot be saved and spent at the same time.

And yes, if the American economy collapses, then all the foreign aid and economic stimulii we are pumping out over the globe will disappear too.

Now, Robert, how close am I getting to what you're trying to say?

Robert Ganshorn Robert Ganshorn | October 4, 2008 6:26 AM

And of course, our ability to supply them with trade upon which they are so very dependent. This would affect us negatively as well, but we are getting off easy. I agree with you that we have a tough road ahead and I still remain hopeful for the people who have been "oversold" credit to stay in their homes at a payment they can afford. More shut up houses subject to squatters, and who knows what, will destroy many neighborhoods.

Bill Perdue Bill Perdue | October 3, 2008 1:49 PM

Ridiculous doesn't begin to describe it. Wacky and silly come closer but even they don’t full describe the statement “I think some people might like economic collapse so that they can puff themselves up…” How does that relate to anything dealing with the economic crisis caused by the losers who run the economy?

Do you think they’re spreading bad news to try to destroy the economy? If so they’re a threat and we need to contact Homeland Security right away. Give us some names, for instance one person who posts at Bilerico and from another source? I’ll make the call and save you the long distance charges.

What you’re trying to do is divert us from the real question? To try to shift the blame away from the corporate rich, management and the politicians who service them. They wrecked the economy all by themselves and trying to apologize for them is futile. It won’t work.

Capitalism is a failure and the proof is all around us. A $12.5 trillion to $15 trillion debt by the end of the year, an unwinnable war that’s become genocide, soaring unemployment, massive numbers of foreclosures and soaring unemployment (159,00 in September alone) and a health system closed to one in six. The parties who support it and bail it are already despised for their efforts and that will only intensify.

Secondly exactly why will one fourth of humanity starve unless we cover the losses of the losers who’ve irreversibly wrecked our economy, our standard of living and our future? What countries do they live in, what’s the agricultural production capacity of those nations, and how will making a few incompetents pay their own debt, as Lincoln recommended, relate to the starvation of billions. Is their only source of credit US banks? Do you have any facts for us, any analysis, or are you just making this up as you go along?

There may indeed be more widespread food and water shortages and more starvation in the future, as bad as what’s occurring African regions undergoing desertification and among the homeless in many North and South American cities but it has it’s origins in the kind of economic damage inflict by Clinton’s NAFTA, Bushes withdrawal from the Kyoto Treaty and the greed of food speculators, oil speculators and housing speculators, and so we’re back to the real villains in all this: the corporate rich, who are a pack of greedy wolves and losers.

Michael Moore describes them to a T:

The richest 400 Americans -- that's right, just four hundred people -- own MORE than the bottom 150 million Americans combined. 400 rich Americans have got more stashed away than half the entire country! Their combined net worth is $1.6 trillion. During the eight years of the Bush Administration, their wealth has increased by nearly $700 billion -- the same amount that they are now demanding we give to them for the "bailout." Why don't they just spend the money they made under Bush to bail themselves out?

Robert Ganshorn Robert Ganshorn | October 4, 2008 11:43 PM

And I am a great fan of freedom of speech and speaking the truth, myself. I only comment on Bilerico while our friend comments on (after a quick look):

Washingtonpost.com
goodasyou.org
alternet
queerty
salon.com
fromtheleft.com
the gully.com
365gay
visablevote08

saying the same things which now clears up, for me, why the inconvenience of topic is so frequently overlooked. Thank you for your fresh perspectives, your "knowledge of the world" and how so few actually need the one country that comprises 25% of the world's GDP. Undoubtedly you are right...

Bill Perdue Bill Perdue | October 5, 2008 2:13 AM

Not all of us are so limited. And many of us are, as you say, open-mined movement theoreticians with ideas worth reading, as opposed to merely glib and wrong.

Now that the rip-off has passed Congress with overwhelming support from Democrats maybe you can calm down. Any losses your portfolio incurs will be paid for by... the rest of us.

Robert Ganshorn Robert Ganshorn | October 5, 2008 2:19 AM

It is only the dynamite thrown in to the open mine that is of concern to me for those many who are poorer off than either of us.

Robert Ganshorn Robert Ganshorn | October 5, 2008 11:26 PM

As you said Bill: "...why will one fourth of humanity starve unless we cover the losses of the losers who have irreversibly wrecked our economy..."

"...do you have any facts for us, any analysis... What countries..."

Firstly, don't quote what Abe Lincoln said in an 1837 bank crisis nearly 100 years before the FDIC was founded as relevant to today's global economy.

Read a newspaper other than the "Daily Worker."

European banks are moving right now to protect themselves from insolvency so no, there is no one else these countries can go to for credits to buy the rice that costs more than twice what it did eight months ago. There is even a relation to the price of oil and the cost of rice Bill.

In my original post, but edited away, was my statement that I own no stock in an American, European or Japanese car company or parts supplier. I am not surprised that you would make an appeal to envy of those who have saved and invested even if it is in government debt.

And a wrong theory repeated verbatim on ten blog sites, (or is it twenty?) does not become more right through repetition. Just as I am certain if we were to meet and have a conversation we would agree about a great number of things.

I will propose one: The Republicans have a tendency to assume people are lazy and need to be kept nose to the grindstone and the Democrats assume people are largely stupid and need government to lead them around by the nose to keep them from walking in to the odd tree. Where that leaves one who is both lazy and stupid who knows. I can tell you that our country can only go up internationally from here and McCain is not the man to improve things. Our country is now hated more internationally than it was eight years ago and that is a matter of great concern.

Email me any time you Socialist Scoundrel, but I think this thread is at it's end.

Bill Perdue Bill Perdue | October 6, 2008 12:17 AM

1)"As you said Bill:'...why will one fourth of humanity starve unless we cover the losses of the losers who have irreversibly wrecked our economy..." "...do you have any facts for us, any analysis... What countries..." So answer the question? Or we'll assume it's just another of your innumerable evasions.

2) Lincoln's remarks are totally relevant. You'll get more chances to read them, so maybe you'll come to understand them and their significance at some point.

3) Your history's off as usual. The Daily Worker ceased publication in 1956. In any case I wouldn't like it much - the Stalinists have been hard core Democrats for decades. They just don't talk about it but if I went to a DP meeting, holding my nose of course, I bet I could spot them.

4) No emails. After the second poison pen email you sent me I blocked yours for good.

Robert Ganshorn Robert Ganshorn | October 6, 2008 12:55 AM

Evade, me? Read a real newspaper if you can.

OK, read the "Polish Daily Zvoda" which has a similar circulation size due to "The Daily Worker" just before it closed. :)

Your question was answered in part in the next paragraph down, but I expect you to do a little thinking too my friend. Sorry you didn't like the article on socialism I sent you, but I read widely and comment only on one blog site. It is a quality thing with me.

Bill Perdue Bill Perdue | October 6, 2008 9:50 AM

Quality does not consist of red baiting, misinformation and glib evasions.

The price of oil and the price of rice are both determined by the predatory speculators who enrich the portfolios of the rich.

Now we're done.

Robert Ganshorn Robert Ganshorn | October 6, 2008 10:02 AM

And no one is yet fed.

Robert Ganshorn Robert Ganshorn | October 6, 2008 11:31 AM

The price of oil/cost of rice component comes from the transport costs, but in Utopian Socialism where no one pays for anything it would not matter.