Bailout by Stealth

While distracted by “bailout bill”, trillions are pumped in

to keep financial balloon inflated

Bailout by Stealth

While the public is distracted by the “bailout bill” and its rejection, trillions are pumped in to keep financial balloon inflated

James Corbett

The media is falling all over itself to report on every minutiae of the so-called Wall Street “bailout bill” and its rejection by Congress yesterday (just a few of the thousands of examples can be seen here and here and here and here). And why not? The media’s breathless coverage of the bill has produced a furious backlash by the public and hysteria on Wall Street in a self-justifying feedback loop that makes the media attention seem merited.

The startling truth which the controlled corporate media is not reporting, however, is that a bailout is actually taking place right now, completely out of the public spotlight. This program has already pumped trillions of dollars into Wall Street (compared to the mere $700 billion proposed in the legislation that the media is focusing on) to help prop up the faltering investment banks and promises to pump in even more, every dime of it to the detriment of the taxpayer though the public will have no stake in its success. Why, then, is this program not being talked about in the media?

Slipping under the radar last week amidst the hullabaloo in Washington over the bailout bill was this story noting that in the past week alone, the Federal Reserve had pumped an astonishing $188 billion per day into the system in the form of emergency credit. This means that in just four days, the Fed injected as much money into the system as the entire $700 billion bailout proposal. After the proposal was rejected, the Fed responded by immediately announcing it would pour another $630 billion into the global financial system.

The Federal Reserve, of course, is America’s central bank and although the above story conjures the reassuring image of a national bank lending out some of its vast reserves to help Wall Street weather the storm, the fact is that the Federal Reserve is not Federal and has doubtful reserves. In fact, the trillions of dollars that have been lent to the banks in the last few weeks were created out of nothing by the privately-owned Federal Reserve. When the Federal Reserve “lends” money to a bank through repurchase agreements (repos), credit auction or other method, it is not actually lending out money from its vaults. It is simply creating the money it “lends” out as electronic credits created in the recipient banks account. It is literally money out of thin air.

That the general public is on the hook for this money created out of nothing is not an exaggeration. It is paid for in a dimly-understood mechanism often known as the “inflation tax.”

Inflation is nothing more than an indication that the ratio of money to products that can be purchased with that money has been increased. Since the overall number of dollars has gone up without any corresponding increase in economic production (as happens when the Federal Reserve creates money out of thin air), the value of each individual dollar goes down. That means that the value of the money in each individuals’ bank account (not to mention their pension and social security dividends) can be reduced simply by the flick of a pen of a Federal Reserve paper-pusher. (Unless of course that individual just happens to be a billionaire investment mogul or a Vice President who can divest themselves of U.S. dollars in time for this inflation not to affect them.) This is sometimes known as an inflation tax because its overall effect is the same as if the government came in and took that value out of the individuals’ bank account. Watch Ron Paul explain the inflation tax in the video below:

The most insidious part of this inflation tax is that the inflation does not begin until the new money begins to circulate in the system. In other words, the first person (or, more likely, giant corporate conglomerate) to use the money receives its full value, while those at the bottom of the pyramid retrieve the diminished returns of a devaluing dollar.

Why, then, is the public not furious about this stealth bailout, now taking place at the blistering pace of nearly $1 trillion a week, and all to the taxpayer’s detriment? The obvious answer is that the media is not whipping the public into a frenzy about it, instead focusing its attention on a $700 billion program and allowing the public to feel like they scored a blow against Wall Street when the program gets rejected. If so, it’s time the public got wise to how the system is really being run by and for the benefit of private bankers and at the expense of the average taxpayer. Otherwise, the fleecing of the public will continue unabated even as the public thinks they’ve won the battle.

Fed keeps banks afloat as money market crisis deepens

Fed keeps banks afloat as money market

crisis deepens

By John Parry and Jamie McGeeever

NEW YORK/LONDON (Reuters) – U.S. banks and money managers borrowed a record amount from the Federal Reserve in the latest week, nearly $188 billion a day on average, showing the central bank went to extremes to keep the banking system afloat amid the biggest financial crisis since the Great Depression.

The data on borrowing from the Fed closed out another day of high anxiety in global money markets. Key measures of funding stress hit record levels on both sides of the Atlantic as nervous market participants awaited developments from Washington on a $700 billion U.S. financial bailout plan.

Federal Reserve data showed on Thursday the total amount banks borrowed nearly quadrupled the previous record of $47.97 billion per day notched just the week before.

“This looks like the balance sheet of a central bank that is keeping the financial system on life support,” said Michael Feroli, U.S. economist with JPMorgan in New York.

Borrowings by primary dealers via the Primary Dealer Credit Facility, and through another facility created on Sunday for Goldman Sachs (GS.N: Quote, Profile, Research, Stock Buzz), Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz) and Merrill Lynch (MER.N: Quote, Profile, Research, Stock Buzz) and their London-based subsidiaries, totaled $105.66 billion as of Wednesday, the Fed said.

The Federal Reserve’s lending to U.S. depository institutions and bank holding companies to finance their purchases of high-quality asset-backed commercial paper from money market mutual funds via a new lending facility the Fed announced on September 19, came in at $72.67 billion as of Wednesday.

The Fed designed the loan facility to help money market funds meet huge demands for redemptions from fearful investors over the past week after one U.S. money market mutual fund’s value fell below $1 a share, and to foster liquidity in the asset-backed commercial paper markets.

The move followed the U.S. Treasury’s action last Friday to set up a temporary guaranty program for the money market mutual fund industry.

Tom Sowanick, chief investment officer at Clearbrook Financial cited “a big increase in borrowings from securities firms which came at a time when the turmoil on Wall Street hit an apex and money market funds came under pressure, so they went to the window to make sure their funds remained stable.”

Lending in the “other credit extensions” category to insurer American International Group (AIG.N: Quote, Profile, Research, Stock Buzz) and possibly others was $44.57 billion as of September 24, compared with $28.0 billion as of September 17.

“It is stunning how much you see the Fed extending credit all over the place,” Feroli said.

“Every facility got used to a large degree, the ABCP facility, the AIG loan, the Primary Dealer Credit Facility and the good old discount window,” he said.

“Everywhere you see huge amounts of reserves being put into the system,” Feroli said.


The data showing the huge reliance of financial institutions on the U.S. central bank came on a day of other extremes within the funding markets for banks and companies.

Key measures of U.S. dollar funding strains hit record levels as nervous market participants awaited developments from Washington on a $700 billion U.S. financial bailout plan.

The inter-bank premium for borrowing three-month dollars over anticipated official policy rates, or Overnight Index Swaps, known as the Libor/OIS spread, blew out to 200 basis points, while the cost of borrowing euros and sterling also jumped.

That dollar Libor/OIS spread was around 164 basis points on Wednesday, and around 80 basis points at the start of September.

Yet late in the New York day, market participants’ hopes of an imminent passage of the $700 billion government bank bailout dragged some gauges of risk aversion including interest rate swap spreads, back from the brink.

The U.S. commercial paper market also shrank dramatically, marking the biggest weekly contraction in a year, Fed data showed on Thursday, as the escalating global credit crisis shook investors’ confidence in all but the safest instruments issued by the U.S. government.

For the week ended September 24, the size of the U.S. commercial paper market, a vital source of short-term funding for daily operations at many companies, shrank by $61.0 billion to $1.702 trillion, the lowest level since early 2006 Federal Reserve data showed.

“The declines add to the urgency for fixes to the credit crisis,” wrote Tony Crescenzi, chief bond market strategist with Miller, Tabak & Co. in New York in an email note.

The closely-watched TED spread, meanwhile, was last indicated around 430 basis points on Reuters screens, edging back up toward the near 500 basis points struck last week, the widest in over a quarter of a century.

The three-month sterling Libor/OIS spread, meanwhile, widened to almost 160 basis points, more than doubling since the start of the month.

These spreads are seen as a key indicator of financial market stress and risk aversion, reflecting the true cost of funding for banks and financial instututions. Some 60 percent of corporate lending is tied to London interbank offered rates (Libor), according to Credit Suisse.

Throw Them All Out.Com

Are You Tired of Being Ripped Off By Congress and the White House?

Is this Wall Street Bailout the Last Straw for You?

Well we have a chance to do something about it this November, on Election Day.  The people of Pennsylvania showed us the way.

Last year, Pennsylvania residents learned that their legislature–Republicans and Democrats–had connived in the middle of the night to give themselves a raise in violation of the state constitution, which said raises could only be given to the next cycle of elected officials, not to those who were voting. They got around this by declaring the increases “undocumented expense reimbursements.”

The citizenry rose up and in a leaderless grassroots campaign, they swept out off office many long-time members of the legislature who had voted for the measure, as well as a judge who backed the action (the state’s judges get whatever the legislators get)!

If Pennsylvania voters can do this, so can the rest of America.

If you are fed up with having your money (and your kids’ money, and their kids’ money!) stolen and handed to the greedy, crooked bankers, insurance executives and auto tycoons who have been destroying jobs and undermining the US economy for years while enriching themselves at our expense, then make a pledge to yourself to vote against any member of your congressional delegation, whatever the party, who votes for this latest colossal $700-billion Wall Street bailout!

Vote for a third party candidate, or vote for the incumbent’s challenger (a better option if you really want to oust him or her).

No exceptions! It doesn’t matter of your senator or representative has done some good things. Voting for this bailout is a travesty that outweighs any other act.

Next (and this is critical!) send this website address:
to everyone you know.

And talk to everyone you know and get them to join this viral campaign to clean out the Capitol of the thieves and corporate whores who are wrecking the country.

We have been passive too long!

Islamophobia: the pathology of paranoia

Islamophobia: the pathology of paranoia

By Abukar Arman

While each has its distinctive history, like Anti-Semitism and racism, Islamophobia is a real phenomenon that cultivates hate among communities, stereotypes a whole group for the acts of a few, and justifies transgression against the innocent. And like the rest, Islamophobia was developed and is fostered by special interest groups who often have access to power in order to reach a political, social, or an economic end.

With few exceptions, gone are the days when the perpetrators of hate would march with banners explicitly expressing their bigoted perceptions and attitudes. However, that is hardly an indication that the phenomenon has seized to exist.

Today, hate speech and propaganda are often craftily camouflaged as talk radio punditry, political lampooning, speeches, or political infomercial.

Last year, in a bizarre outburst of bigotry that makes Islamophobes such as David Horowitz, Daniel Pipes and Robert Spencer objective intellectuals, radio talk show host Michael Savage of the Savage Nation had this ranting and raving to share with his audience: �I�m not gonna put my wife in a hijab. And I�m not gonna put my daughter in a burqa. And I�m not gettin� on my all-fours and braying to Mecca . And you could drop dead if you don�t like it.�

Spewing his hate via hundreds of the over 1,200 radio stations owned by the notoriously Islamophobic corporation Clear Channel, he continued his provocative diatribe: �You can shove it up your pipe. I don�t wanna hear anymore about Islam. I don�t wanna hear one more word about Islam. Take your religion and shove it up your behind. I�m sick of you.�

Along the same path, albeit more artistically, the July 2008 issue of the New Yorker magazine had on its front page a political caricature of Barak and Michelle Obama. The couple is standing in the middle of the Oval Office. Obama is wearing a traditional Islamic dress with turban and sandals. He is approvingly fist-bumping with a militant looking Michelle as his sinister left eye gazes away. Michelle is wearing an Angela Davis style afro and a guerilla fatigue with an M-16 hanging from her back. Looking over them is an Africa-American looking picture of Osama Bin Laden . . . hanging over the fire place where the American flag is set on flames.

Then came September 4, 2008 — the Republican Convention — where the merchants of fear and paranoia found their ideal platform. Inadvertently or otherwise, the underlying theme seemed to be to broaden the definition of the enemy from a cult-like Al-Qaeda to a much broader, indeed more fluid, definition that indicts all those who practice Islam as suspect or worse.

Rudolph Giuliani, the former New York City mayor, condemned the Democrats for being �politically correct� and avoiding the use of the term �Islamic terrorism�� to describe the enemy.

Taking the politically synthesized anti-Islamic mantra to the next level by directly speaking to the race-conscious voters, former congressional leader Dick Armey, who now leads one of the most power lobby groups in Washington, had this to say: Barack Obama�s �funny name� could �give people concerns that he could be or has been too much influenced by Muslims, which is a great threat now.� Obama is Christian.

It is a shame that the media are less interested in what Mr. Armey and others who routinely use more provocative and broadly condemning terms such as �Islamo-fascism,� �Islamic terrorism,� and �Jihadism� to describe the enemy send to the 7 million Muslims in the United States and 1.2 billion around the world.

Recently, many localities around the U.S. were hit by a new �swift-boating� campaign. This one, targeting swing states, is aimed to induce paranoia by distributing �28 million DVDs� of the propaganda film Obsession: Radical Islam�s War Against the West.

The film, like any Goebbelian piece of propaganda, connivingly exploits the human tendency to surrender their capacity to think critically when their emotions are stirred or fear is instilled in their hearts. The film does this successfully as it is made from selective footage from various parts of the world of individuals expressing hate, training, and committing acts of terror, and the bloody scenes of their crimes. It is a dangerously effective way of collectively demonizing Muslims, as the so-called experts featured in the film use all the aforementioned hot button terminologies to describe the terrorists and interlink all these cases with their subjective narrative.

This latest campaign is being carried out by an obscure New York based group called The Clarion Fund whose funders are not known.

In pursuit of their goal to effectively distribute the DVDs and secure subliminal legitimacy, this group has selectively targeted the newspaper distribution apparatuses of various cities in critical states. Here in central Ohio, the Columbus Dispatch has distributed 10,000 copies of the DVDs through its most widely read issue, the Sunday Dispatch. The same was done by the New York Times, the Miami Herald and a host of other newspapers.

Venomous hyperbole aimed to stir fear and paranoia and indict all Muslims continues despite the Department of Homeland Security Office for Civil Rights and Civil Liberties� conclusion that �Words matter� and its recommendation that U.S. officials and representatives should � . . . avoid inflating the religious bases and glamorous appeal of the extremists� ideology.� According to a memo from the said department, the terminologies used should depict the terrorists as the dangerous cult leaders they are.

Abukar Arman is a freelance writer who lives in Ohio. He writes about Islam, Somalia and U.S. foreign policy.

Copyright © 1998-2007 Online Journal

Eat your cats and dogs

Eat your cats and dogs

By Joel S. Hirschhorn
Online Journal Contributing Writer

Sep 30, 2008, 00:11

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Nations come and go, rise and fall as elites and the wealthy make victims of most citizens and plutocracies prevail.

Current dogma is that we live in the greatest nation on Earth. Perhaps in terms of ideals there is some truth to that. But with another trillion dollars that we now must borrow at higher costs because of the meltdown of the financial sector, solidifying our position as the greatest debtor nation, Americans have little to be proud of. Our government and politicians as well as the corporate state have failed us. What do our young people and future generations have to look forward to? Be prepared to eat your cats and dogs.

Still more lies and deceptions will surely hit us as the fear-selling two-party plutocracy works hard to convince us prior to the coming election that things have turned better. In reality, there is no reason whatsoever for thinking that the nation is back on the right track. Of all the many narcotic delusions filling people�s heads, the most dangerous and self-defeating is that we can vote our way out of this mess. Everyone needs to understand that Democrats in Congress have played a major role in delivering the nation into the abyss we now find ourselves in.

If Barack Obama had an ounce of honesty and courage, he would have boldly told his first debate audience that he was going to modify his spending plans and focus on reducing the nation�s debt. And why did he not express deep sadness that the current bailout was repeating a long history of making a mockery of capitalism, with government refusing to let most large companies fail? When corporate fat cats know that they can continue to rape the country and walk away with tons of money, all we really have is corporate socialism. So why did we not hear Obama talk about his commitment to put corporate criminals in prison? Not dozens, but hundreds of Wall Street thieves and lying bank officials should be dragged publicly in handcuffs into the justice system. Why can�t Obama talk this way?

Don�t get me wrong. John McCain is even worse. Newsweek has reported that McCain, in his last mission before becoming a prisoner of war, ignored the warning that an enemy missile had locked onto his plane and instead of taking evasive action decided to keep flying straight ahead to complete his mission. Is it not clear that McCain will fly the nation straight into oblivion if he thinks his conception of our national mission should be adhered to, no matter what the costs are?

Back to my point: Americans cannot vote their way out of this mess. Their only real opportunity this year is to vote AGAINST the two-party plutocracy by voting for any of the four third-party presidential candidates. We need the world to see tens of millions of votes protesting the failures of both major parties. This electoral rebellion would keep faith with Thomas Jefferson�s correct view that America would need a revolution every generation or so. To keep voting for Democrats and Republicans just makes gullible and delusional citizens co-conspirators in the vast criminal conspiracy that is our political system.

Keep that sickening image of Americans, many sleeping in the cars, unable to afford pet food and their own food in mind when you go to vote. We are not merely on the wrong track. We are on track for people being forced to eat their cats and dogs.

HOUSE VOTE: The Uprising Comes to Wall Street and Washington

HOUSE VOTE: The Uprising Comes to Wall Street and Washington

by David Sirota

I’m scheduled to appear on CNN at 3:30pm EST to discuss the House’s extraordinary vote to reject the $700 billion Wall Street bailout. What I’m going to say is pretty simple: it’s clear that Congress is facing a full on revolt from both the Right and Left – the very revolt that I predicted in my book, The Uprising. No longer is this a populist revolt merely scaring Wall Street and Washington – this is a populist revolt that has, to quote Markos, crashed the gate, and it represents a real victory for the progressive movement and voices who said Hell No.

Those who are surprised by this turn of events just haven’t been paying attention to what’s going on out in the country – they haven’t been paying attention to, for instance, the social survey research showing rising rage against both our corrupt government and Corporate America. During my three-month book tour, I faced a wave of skepticism from the Establishment media about my thesis. This earthquake on the floor of the U.S. House should end that skepticism once and for all.

Just as I said in the book that it’s not clear what is going to come out of the Left-Right grassroots uprising throughout the country, it’s not clear what is going to come out of this uprising in Congress. Will Democratic leaders tack to the hard right, load the bill up with corporate tax cuts and pass this bill with only Republican votes? Or will they actually be leaders of the Democratic Party, make this bill a vehicle for the kind of New Deal-style investments and regulations that are necessary to start rebuilding this country, and pass this bill with full Democratic Party support?

This is the question moving forward. I’ve laid out the top 5 reasons to vote against this bill and go back to the drawing board. That article outlines what should be the basic conditions for any bailout, including a speculators tax, re-regulation, economic stimulus, bankruptcy law reform and aid to homeowners. No amount of tinkering with Paulson’s atrocity is going do the trick. They have to go back and start from scratch.

Make no mistake about it. This is not a moment of celebration; it is a moment for increasing pressure. The Uprising is waiting for a serious response; will Congress step up to the plate? Contact your member of Congress right now and demand he/she goes back to the drawing board.