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Commentary Last Updated: Apr 17th, 2009 - 00:24:33

In the woods with Obama
By Jerry Mazza
Online Journal Associate Editor

Apr 17, 2009, 00:17

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Well, folks, we�re still deep in the woods, according to President Obama�s Tuesday speech. And as he said, �we will not finish it in one year or even many, but if we use this moment to lay that new foundation, if we come together and begin the hard work of rebuilding, if we persist and persevere against the disappoints and setbacks that will surely lie ahead, then I have no doubt that this house will stand and the dream of our founders will live in our time.� Man, I�d love a few specifics.

Like are we going to re-establish the Glass-Steagall Act within the next month to prevent the further mixing of commercial and investment banks like the big five that are now choked with derivative debt amounting to more than $200 trillion? In fact, within the next month are we also going to repeal the Commodities Futures Modernization Act, which would prevent any future untold amounts of unregulated derivatives from poisoning our economy? And what about reinstating the old uptick rule? When�s that coming down the pike, say, in a couple of weeks?

Specifics, that�s what I would like to hear here in the woods with you, President Obama, not the Lincolnesque rhetoric that is really beginning to cloy. Especially as the $750 billion plus in TARP money is going down a sump hole with little to show for but a bonanza for a number of investment banks that got bailed out. In the woods here, I see a darkness of record unemployment and personal and corporate bankruptcies that is settling while the wolf is beginning to howl at the cabin door, howling for more giveaway loot. Of course, the wolf is disguised in banker�s clothing.

And here we are Mr. and Mrs. Hansel and Gretel looking for some Stimulus crumbs to lead us back to some kind of prosperity. Grandma�s house is exactly where the wolf is lurking in Grandma�s garb, so nice and friendly, licking her chops, and blinking her eyes at us: �sub-prime loans for sale, cheap, real cheap, honey. Don�t got to pay no money but 80 cents on the dollar. Fed pay the rest or the Treasury. Some call it usury, but shucks, it�s just us, honey.� But, Grandma, we want the Change Deal, the New Deal, not the old deal. �You bes� be getting on home now, Grandma�s getting hungry, and angry.�

Uh huh, uh huh! But why did you say, Mr. President, we can�t nationalize the nasty banks, that is, while they get stress-tested, get their assets in gear, if they have any, or get out of the way if they don�t? Did you really say, �Governments should practice the same principle as doctors: first, do no harm?� Jesus, did you really mean that? Roosevelt shut the banks for a week and nationalized them so that they could determine which banks were fit and which were fit to be locked up for good. We thought that�s what you meant with �Change.� That�s not socialism.

It�s sort of what he did in World War II, when the government took over the means of production to make it more productive and focused on the war effort. That worked out pretty good. We kicked some real butt even though some people called that socialism. So why are you worried about it now? Are those dumb-ass Republicans scaring you, calling you a socialist terrorist communist Islamo-fascist, whatever they can think of, even though they�ve lost their power to think. I mean look at McCain and Palin. You ate them up, 1, 2, 3, mmmm, good.

Now, when you said the Stimulus Plan �efforts to strengthen the banking system and attempts to rescue the flagging American auto industry have all born fruit,� what exactly did you mean? �An increase in home-mortgage refinancings and more lending by small businesses?� But that�s recirculating the same old toxic paper? As to the American auto industry, you gave it a good kick in the head from what I could see and sent its ex-CEO away reeling. And �more lending by small businesses,� means more what, more credit at the bodega, drug and sundries store and pizza palace? You think that�ll do it for us?

Boss, I not only think we�re in the woods. We�re in the dark wood of Error, like that I-talian poet Dante wrote about, like nine circles of hell . . .

(1) We got the investment banks trying to scam back their losses from derivatives.

(2) We got the mortgage companies re-peddling their old bad loans.

(3) We got the credit card companies looking for more ways to scam people into borrowing.

(4) We got some clowns trying to push a one-world currency down our throat that will trash ours (and changing interest rates at their discretion).

(5) We got the multi-nationals outsourcing more jobs to fatten their slave labor bottom line.

(6) We got the Chinese using their old US dollars to buy us.

(7) We got a clean-coal problem, like you don�t clean carbon, no matter how much money you throw at it. You just fatten up the coal industry and clean us out.

(8) We got you, Mr. President, talking about �shoring up Social Security.� What the hell does that mean? Shoring it up? Stealing it like all the past presidents have?

(9) And we�ve got a useless Fed that just answers to a board of old farts who never got elected to anything and yet they control our banks and our currency.

I can hear the screaming and crying of the lost. That�s a hell of a mess. And we want out of this dark wood of error to see some sunlight sooner than in many, many years. We want to see some real change now, like today, tomorrow, and the day after. Not the kind like closing Guantanamo so you can send the inhabitants for rendition in foreign countries. Not like starting still another big war in Afghanistan and Pakistan. Not like keeping the USAPATRIOT Act on the books. Not like sinking us in more debt than we ever dreamed, including with Bush. Change this is not, unless for the worse.

Now, if you aren�t up to it, let us know. And we�ll have some other kind of change in four years. That doesn�t give the vetting guys a whole lot of time to find some new brilliante, snake oil salesman, or conservative dumb-dumb. But it seems we went from idiot to idiot-savant. You�ll beg my pardon, but that�s how it looks. Lotsa talk, boss, but not too much action.

And if you think this is just me, take a look at RGE Monitor�s Newsletter, which gives you a highly technical look at the economy from its chairman. As Nouriel Roubini points out in a recent writing: �In brief, banks are benefiting from close to zero borrowing costs and fewer competitors; they are benefiting from a massive transfer of wealth from savers to borrowers given a dozen different government bailout and subsidy programs for the financial system; they are not properly provisioning/reserving for massive future loan losses; they are not properly marking down current losses from loans in delinquency; they are using the recent mark-to-market accounting changes by FASB to inflate the value of many assets; they are using a number of accounting tricks to minimize reported losses and maximize reported earnings; the Treasury is using a stress scenario for the stress tests that is not a true stress scenario as actual data are already running worse than the worst case scenario.

�Other commentators also point to the fact that many of these banks were among the main recipients of AIG bailout funds in previous months, e.g., Goldman Sachs ($12.9 billion), Merrill Lynch ($6.8 billion), Bank of America ($5.2 billion), Citigroup ($2.3 billion) and Wachovia ($1.5 billion), according to New York Times data. The firms involved dismiss this factor as immaterial for Q1 earnings. Nevertheless, the GAO noted in a report at the end of March that Treasury should require that AIG seek additional concessions from employees and existing derivatives counterparties.

�Meanwhile, in the real economy credit growth to the private sector has continued to slow at a fast pace in the U.S. as well as in Europe, while U.S. credit card charge-offs rose to an all-time high in February at 8.82%. Moody�s predicts the charge-off rate index will peak at about 10.5 percent in the first half of 2010, assuming a coincident unemployment rate peak at 10 percent. In turn, Fitch warns that credit card delinquencies point to record defaults ahead. Keep also in mind that global high-yield defaults are expected to reach 15% by the end of 2009 and that the commercial real estate market has just turned.�

So, now that we all agree, boss, what�s gonna be?

Jerry Mazza is a freelance writer living in New York City. Reach him at His new book, State Of Shock: Poems from 9/11 on� is available at, Amazon or

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