Ben Slade

So it's not really Wall Street and big banks which are the source of our econmic problems, it's globalization.

From http://news.salon.com/2011/10/11/what_caused_the_wealth_gap/:

"for most of American society, and certainly for the majority of Americans who don’t have a bachelor’s degree, globalization has meant facing much lower-wage workers abroad and increasingly powerful competitive pressures. So our society began to separate between the “haves” and the “have-nots,” really in the early 1980s."

And paraphrasing: Ronald Reagan's solution to the problem (less government), completely missed the point and, in fact, made things worse.

A section of the graphical table showing what caused the increases in the national debt over the past ten years. Blue sections represent Obama's policies. Red sections represent Bush policies.

From the WhiteHouse.gov blog Where does our national debt come from :

From FactCheck.org:

What has produced these huge budget gaps? Tax cuts and wars have been big factors, as have recessions and expanded spending for health care in both Republican and Democratic administrations. For example:

• Income-tax receipts are down sharply since the Bush tax cuts. In fiscal 2000, the year before the cuts began to take effect, receipts from the federal income tax on individuals amounted to 10.2 percent of GDP. That figure was down to 6.2 percent of GDP last year.
• Spending for the military and for homeland security has risen substantially since the attacks of Sept. 11, 2001. Spending for national defense rose from 3.0 percent of GDP that year to 4.8 percent last year.
• Non-military spending also has continued to rise. President George W. Bush pushed through an expensive prescription drug benefit for seniors in 2003, the largest expansion of Medicare in its history. In the financial crisis of 2008, Bush also pushed for and signed for a massive banking bailout. In early 2009, President Barack Obama pushed for and signed an expensive stimulus measure, and after a long fight in Congress he signed another expensive plan, the health care law, in March of last year, aimed at expanding coverage for millions who lack health insurance.
• Two economic recessions have had their effect. The recession of 2001 began in March and lasted until November. And the worst downturn since the Great Depression began in December 2007 and continued until June 2009. In both cases unemployment remained high for long after business activity began to recover, holding back both wages and the taxes that jobless workers would have paid on them.

An analysis of the different types of expenses that contribute to the national debt. Note that, according to this graph, tax cuts and defense expense increases contributed more to the deficit than did the 2008 recession (from a report by the PEW Economic group. Click on the graph to see a larger view):

"Extend and Pretend": The Severe Ramifications of Wall Street's Game:

A systematic plan to create the illusion of stability and provide no-risk profits to the mega-Wall Street banks was implemented in early 2009 and continues today. The plan was developed by Ben Bernanke, Hank Paulson, Tim Geithner and the CEOs of the Wall Street banking syndicate. The plan has been enabled by the FASB, SEC, IRS, FDIC and politicians in Washington DC. This master plan has funneled hundreds of billions from taxpayers to the banks that created the greatest financial collapse in world history. The authorities had a choice.

• In April 2009 the FASB caved in to pressure from the Federal Reserve, Treasury, and Wall Street to suspend mark to market rules, allowing the Wall Street banks to value their loans and derivatives as if they were worth 100% of their book value. 
  
  
• The Federal Reserve balance sheet consistently totaled about $900 billion until September 2008. By December 2008, the balance sheet had swollen to $2.2 trillion as the Federal Reserve bought $1.3 trillion of toxic assets from the Wall Street banks, paying 100 cents on the dollar for assets worth 50% of that value.
  
  
  
  
• In November 2009 the Federal Reserve and IRS loosened the rules for restructuring commercial loans without triggering tax consequences. Banks were urged to extend loans on properties that had fallen 40% in value as if they were still worth 100% of the loan value.
  
  
• By December 2008 the Federal Reserve had moved their discount rate to 0%. For the last two years, the Wall Street banks have been able to borrow from the Federal Reserve for free and earn a risk-free return of 2%. The Federal Reserve has essentially handed billions of dollars to Wall Street.
  
  
• When it became clear in October 2010 that almost two years of unlimited liquidity being injected into the veins of zombie banks was failing, Ben Bernanke announced a second round of quantitative easing (QE2). He has expanded the Fed balance sheet to $2.6 trillion by injecting $3.5 billion per day into the stock market by buying US Treasury bonds. Bernanke’s stated goal has been to pump up the stock market. While taking credit for driving stock prices higher, he denies any responsibility for the energy and food inflation that is spurring unrest around the world.
  
  
• The Federal Reserve has increased the monetary base by $500 billion in the last three months in a desperate attempt to give the appearance of recovery to a floundering economy.

• Beginning on December 31, 2010, through December 31, 2012, all noninterest-bearing transaction accounts are fully insured, regardless of the balance of the account, at all FDIC-insured institutions. The unlimited insurance coverage is available to all depositors, including consumers, businesses, and government entities. This unlimited insurance coverage is separate from, and in addition to, the insurance coverage provided to a depositor’s other deposit accounts held at an FDIC-insured institution.

[During the 2008 crash] The FASB changed the [mark to market] rules so that when the market prices were not orderly, or where the bank was forced to sell the asset for regulatory purposes, or where the seller was close to bankruptcy, the bank could ignore the market price and make up one of its own. Essentially the banking syndicate got to have it both ways. It drew all the benefits of mark to market pricing when the markets were heading higher, and it was able to abandon mark to market pricing when markets went down the drain.

Part two of the master cover-up plan has been the extending of commercial real estate loans and pretending that they will eventually be repaid. Billions in commercial loans are in distress right now because tenants are dropping like flies. Rather than writing down the loans, banks are extending the terms of the debt with more interest reserves included so they can continue to classify the loans as “performing.” The reality is that the values of the property behind these loans have fallen 43%. Banks are extending loans that they would never make now, because borrowers are already grossly upside-down.

Extending the length of a loan, changing the terms, and pretending that it will be repaid won’t generate real cash flow or keep the value of the property from declining. US banks hold an estimated $156 billion of souring commercial real-estate loans, according to research firm Trepp LLC. About two-thirds of commercial real-estate loans maturing at banks from now through 2015 are underwater

It should warm your heart to know that financial [institution] profits have amazingly reached their pre-crash highs. All it took was the Federal Reserve taking $1.3 trillion of bad loans off their books, overstating the value of their remaining loans by 40%, borrowing money from the Fed at 0%, relying on the Bernanke Put so their trading operations could gamble without fear of losses, and lastly, pretending their future losses will be lower and relieving their loan loss reserves. The banking industry didn’t need to do any of that stodgy old-school stuff like make loans to small businesses. Extending and pretending is much more profitable.

"The way to understand the conservative moral system is to consider a strict father family. The father is The Decider, the ultimate moral authority in the family. His authority must not be challenged. His job is to protect the family, to support the family (by winning competitions in the marketplace), and to teach his kids right from wrong by disciplining them physically when they do wrong. The use of force is necessary and required. Only then will children develop the internal discipline to become moral beings. And only with such discipline will they be able to prosper. And what of people who are not prosperous? They don't have discipline, and without discipline they cannot be moral, so they deserve their poverty. The good people are hence the prosperous people. Helping others takes away their discipline, and hence makes them both unable to prosper on their own and function morally. "

"the report still makes for compelling reading because so little has changed as a result of the debacle, in both banking and in its regulation. Providing chapter and verse, for example, on the bumbling and siloed management at the nation’s largest banks is enlightening, in that many of these institutions are even bigger than they were before. With too-big-to-fail institutions now larger than ever, we are almost certain to go through another episode like 2008 in the not-too-distant future" ...

"It is disturbing indeed that [the Federal Reserve], defiantly inert and uninterested in reining in the mortgage mania, received even greater regulatory powers under the Dodd-Frank law that was supposed to reform our system."

"When the government stepped in to save Citigroup in 2008, 'it did more than reassure troubled markets — it encouraged high-risk behavior by insulating risk-takers from the consequences of failure' " ...

“Unless and until an institution such as Citigroup is either broken up, so that it is no longer a threat to the financial system, or a structure is put in place to assure that it will be left to suffer the full consequences of its own folly, “the prospect of more bailouts will potentially fuel more bad behavior with potentially disastrous results.”

Most significantly, the web page shows the tremendous cost of entitlements and military spending, and conversely, the insignificance of other popular budget cutting ideas (like cutting the size of the government)

After the Democratic “shellacking” in the midterm elections, everyone wondered how President Obama would respond. Would he show what he was made of? Would he stand firm for the values he believes in, even in the face of political adversity?

On Monday, we got the answer: he announced a pay freeze for federal workers. This was an announcement that had it all. It was transparently cynical; it was trivial in scale, but misguided in direction; and by making the announcement, Mr. Obama effectively conceded the policy argument to the very people who are seeking — successfully, it seems — to destroy him....

The truth is that America’s long-run deficit problem has nothing at all to do with overpaid federal workers. For one thing, those workers aren’t overpaid. Federal salaries are, on average, somewhat less than those of private-sector workers with equivalent qualifications. And, anyway, employee pay is only a small fraction of federal expenses; even cutting the payroll in half would reduce total spending less than 3 percent.

So freezing federal pay is cynical deficit-reduction theater. It’s a (literally) cheap trick that only sounds impressive to people who don’t know anything about budget realities. The actual savings, about $5 billion over two years, are chump change given the scale of the deficit....

..he [Obama] apparently intended the pay freeze announcement as a peace gesture to Republicans the day before a bipartisan summit. At that meeting, Mr. Obama, who has faced two years of complete scorched-earth opposition, declared that he had failed to reach out sufficiently to his implacable enemies. He did not, as far as anyone knows, wear a sign on his back saying “Kick me,” although he might as well have...

The real question is what Mr. Obama and his inner circle are thinking. Do they really believe, after all this time, that gestures of appeasement to the G.O.P. will elicit a good-faith response?

What’s even more puzzling is the apparent indifference of the Obama team to the effect of such gestures on their supporters. One would have expected a candidate who rode the enthusiasm of activists to an upset victory in the Democratic primary to realize that this enthusiasm was an important asset. Instead, however, Mr. Obama almost seems as if he’s trying, systematically, to disappoint his once-fervent supporters, to convince the people who put him where he is that they made an embarrassing mistake.

Whatever is going on inside the White House, from the outside it looks like moral collapse — a complete failure of purpose and loss of direction....

From: The Huffington Post (by Robert Scheer, author of the 'The Great American Stickup')

Even after a crash that economists agree is the biggest since the granddaddy of 1929, the president's proposed reform legislation stops far short of reintroducing the kind of regulation of the markets that prevented such disasters in the intervening eighty years. We still see a persistent fear, stoked by the same folks that led us into this abyss, that regulation and scrutiny will kill the golden goose of Wall Street profits and, by extension, U.S. prosperity.

If we as a people learn anything from this crash, however, it should be that there are no adults watching the store, only a tiny elite of self-interested multimillionaires and billionaires making decisions for the rest of us. As long as we cede that power to them, we can expect to continue getting bilked.

Three key myths consistently propagated about the financial markets proved devastating in this event. The first is that buyers and sellers are all logical and well informed about what they are doing, so the markets will always be "corrected" to provide accurate price values. The second is that whatever happens in these "free markets," the general public will not be hurt -- only irresponsible gamblers will lose their shirts. The third is that whenever the government gets involved, it will only screw things up; even if regulators only ask questions, it will poison the pond and spook the fish, to everybody's detriment.

All of these assumptions were proven false; the brave new world order of super-rational high-tech derivative marketing based on a Nobel Prize-winning mathematical model turned out to be a prescription for financial madness. A win-win system too good to be true turned out to be a cruel hoax in which most suffered terribly -- and not just that majority of the world's population that suffers from the whims of the market, but even some who designed and sold the new financial gimmicks. Left to their own devices, freed of rational regulatory restraint by an army of lobbyists and the politicians who serve them, one after another of the very top financial conglomerates imploded from the weight of their uncontrolled greed. Or would have imploded, as in the examples of Citigroup and AIG, if the government had not used taxpayer dollars to bail out those "too big to fail" conglomerates.