The Name of the Game Is Bailout

In reading through Federal Reserve Chairman Ben Bernanke's most recent treatise on the ongoing financial crisis and what the U.S. "gubment" along with its central bank are doing to remedy the situation, it struck me that if G. Edward Griffin ever does a comprehensive update to The Creature from Jekyll Island, he will have his work cut out for him.

Those of you who have read this fine tome will recall the following essential parts:

Chapter Two: The Name of the Game is Bailout

Chapter Three: Protectors of the Public

Of course, these follow the even more essential Chapter 1 that discusses just how the legislation for the formation of the Federal Reserve was crafted on a secret retreat to Jekyll Island with the world's most powerful Wall Street bankers and Senator Nelson W. Aldrich, the chairman of the National Monetary Committee and father-in-law to John D. Rockefeller Jr.

Chapter two details the real purpose of the Fed (at least in the view of Mr. Griffin) and chapter three chronicles the many bailouts that have been conducted over the years, that list growing much, much longer in a very short period of time over just the last year and, hence, the extraordinary effort that would be required to bring it up to date.

As this relates to yesterday's speech, from the chapter two summary comes the following:

The final solution on behalf of the banking cartel is to have the federal government guarantee payment of the loan should the borrower default in the future. This is accomplished by convincing Congress that not to do so would result in great damage to the economy and hardship for the people. From that point forward, the burden of the loan is removed from the bank's ledger and transferred to the taxpayer.

This is important since, apparently, some members of Congress need a bit more convincing these days and, in yesterday's speech, the Fed chairman seems happy to do his duty.

After recapping some of the important events of the financial crisis, Fed chief Ben Bernanke went on to talk about the Fed's new ZIRP (Zero Interest Rate Policy) "toolkit" which consists primarily of "lending to financial institutions, providing liquidity directly to key credit markets, and buying longer-term securities", and then on to the "Exit Strategy", which will surely be much more difficult than he lets on.

But, the most intriguing part follows.

However, with the worsening of the economy's growth prospects, continued credit losses and asset markdowns may maintain for a time the pressure on the capital and balance sheet capacities of financial institutions. Consequently, more capital injections and guarantees may become necessary to ensure stability and the normalization of credit markets. A continuing barrier to private investment in financial institutions is the large quantity of troubled, hard-to-value assets that remain on institutions' balance sheets. The presence of these assets significantly increases uncertainty about the underlying value of these institutions and may inhibit both new private investment and new lending. Should the Treasury decide to supplement injections of capital by removing troubled assets from institutions' balance sheets, as was initially proposed for the U.S. financial rescue plan, several approaches might be considered.
...
The public in many countries is understandably concerned by the commitment of substantial government resources to aid the financial industry when other industries receive little or no assistance. This disparate treatment, unappealing as it is, appears unavoidable. Our economic system is critically dependent on the free flow of credit, and the consequences for the broader economy of financial instability are thus powerful and quickly felt. Indeed, the destructive effects of financial instability on jobs and growth are already evident worldwide. Responsible policymakers must therefore do what they can to communicate to their constituencies why financial stabilization is essential for economic recovery and is therefore in the broader public interest.

Some lip-service is paid to the problem of financial institutions deemed "too big to fail", but surely, Ben Bernanke knows that "The Name of the Game is Bailout".

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Comments

[mauijeff:]

If anyone believes that the current economic problems just happened because we live in a imperfect world, they should watch the next few year carefully. The central banks are now picking the winners and losers. The banks that were the most irresponsible are currently being bailed out. These banks now have more reserves than at any time in history. When the economy hits bottom these banks will purchase everything they want for pennies on the dollar (yes, banks can buy stuff) and emerge more powerful than ever. Years after this has all happened we will know the facts but it will be too late. We all know now that the great depression was a staged event and we all know who created the stock market crash and who profited.

Jan 14 05:23 AM

[Smarty_Pants:]

"The public in many countries is understandably concerned by the commitment of substantial government resources to aid the financial industry"

and rightly so:

"There are severe limits to the good that the government can do for the economy, but there are almost no limits to the harm it can do."
--Milton Friedman

Jan 14 02:23 PM

[johnbee:]

we had exactly the same in England in 1974 but with a lot more discretion as the media were less intrusive in those days. The Bank of England bailed out all those banks run by people who were kissing cousins of all the best families in England and all the nouvea upstarts that hadn't intermarried with them by then were abondoned. What followed was a slow climb back over the next ten years. Not sure if this will apply in US terms?

Jan 14 02:31 PM

[Sailorman:]

So who created it and who profited?


On Jan 14 05:23 AM MauiJeff wrote:

> If anyone believes that the current economic problems just happened
> because we live in a imperfect world, they should watch the next
> few year carefully. The central banks are now picking the winners
> and losers. The banks that were the most irresponsible are currently
> being bailed out. These banks now have more reserves than at any
> time in history. When the economy hits bottom these banks will purchase
> everything they want for pennies on the dollar (yes, banks can buy
> stuff) and emerge more powerful than ever. Years after this has all
> happened we will know the facts but it will be too late. We all know
> now that the great depression was a staged event and we all know
> who created the stock market crash and who profited.

Jan 14 06:43 PM

[andruomail:]

Yet the banks aren't happy about their growing inventory of houses?

> If anyone believes that the current economic problems just happened
> because we live in a imperfect world, they should watch the next
> few year carefully. The central banks are now picking the winners
> and losers. The banks that were the most irresponsible are currently
> being bailed out. These banks now have more reserves than at any
> time in history. When the economy hits bottom these banks will purchase
> everything they want for pennies on the dollar (yes, banks can buy
> stuff) and emerge more powerful than ever. Years after this has all
> happened we will know the facts but it will be too late. We all know
> now that the great depression was a staged event and we all know
> who created the stock market crash and who profited.

Jan 14 08:24 PM

[donzelion:]

"Our economic system is critically dependent on the free flow of credit, and the consequences for the broader economy of financial instability are thus powerful and quickly felt."

Hmmm...thing is, our economic system is even more dependent on the free flow of food, water, and electricity than it is on credit - but that doesn't mean that the government needs to bail out every farmer, large or small.

The issue is not the importance of the financial sector - which is unquestionable. Rather, the issue is how to properly allocate the risks of failure.

Jan 15 05:29 AM

[Al-USA:]

Get rid of the private Fed system of banks. Surely a public system of banks can not do any worse. Thanks for the introduction to the book, I'll be sure to read it.

Jan 17 04:35 AM

[wasaka:]

Correct you are.

Webster Tarpley wrote a book 10 years ago called
SURVIVING THE CATACLYSM: YOUR GUIDE THROUGH
THE WORST FINANCIAL CRISIS IN HUMAN HISTORY.

Chapter 2 goes into great detail explaining derivatives
and how these so-called "financial instruments" were
a time bomb that result in CATACLYSM and would be
key factor to usher in a New World Order.


On Jan 14 05:23 AM MauiJeff wrote:

> If anyone believes that the current economic problems just happened
> because we live in a imperfect world, they should watch the next
> few year carefully. The central banks are now picking the winners
> and losers. The banks that were the most irresponsible are currently
> being bailed out. These banks now have more reserves than at any
> time in history. When the economy hits bottom these banks will purchase
> everything they want for pennies on the dollar (yes, banks can buy
> stuff) and emerge more powerful than ever. Years after this has all
> happened we will know the facts but it will be too late. We all know
> now that the great depression was a staged event and we all know
> who created the stock market crash and who profited.

Jan 26 12:34 PM

[Nye Lavalle:]

I have told people for years this was coming and everyone ignored the warnings. After reading Mr. Griffin's book, my version of reality and American history was forever altered. This is not some Altered States version of what is or isn't reality, THIS IS REALITY AND THE REAL TRUTH.

It has amazed me how many are involved in their limited way in this scandal. You must see the new Moyers interview with Bill Black located at www.pbs.org/moyers/jou... and you will learn more and see Griffin'e version is RIGHT ON TARGET!!!

While I have always had a strong faith in God, I have never been religious and accepted one man or woman's religion over another. However, what amazes me is that those on the Christian Right do not get up and rebel against the fraudsters on Wall St. and those behind "central banking" around the world. Jesus only displayed ANGER twice in the bible.

It was not against the prostitutes or the homosexuals, it was against the "money changers" in the temple (i.e. bankers) when he overturned their tables and took the whips out to drive them out of the temple. Early Christians were against charging interest on loans (usury). Now, we have 30% on credit cards.

It's time everyone get educated on America's and the World's financial systems. It's obvious that corporate America or even America's banks control America and our government, it's the INTERNATIONAL BANKERS! Until we and each other nation in the world open up this black box of alchemists, we will continue to be governed and "controlled" by a group that keeps us each enslaved to a system of debt.

Go see the Griffin's work on Youtube at www.youtube.com/watch?... and you can learn more then buy the book and read each chapter and don't miss a word. It will rewrite history for you and open your eyes to a new reality and a reality you must be aware of!

Nye Lavalle

Apr 05 06:31 PM