FedUpUSA

Most Americans have a deep aversion to the phrase “redistribution of wealth”, and rightly so.  On a fundamental level, it is just not right to take the money that one man has worked so hard to earn and “redistribute” it to someone else.  In the political realm, the phrase “a redistribution of wealth” is usually a reference to our ballooning social programs, but what most Americans don’t realize is that one of the biggest redistributions of wealth in world history took place during the Wall Street bailouts of a couple years ago.  Trillions of dollars of our money and of money that belongs to future generations was redistributed to the Wall Street bankers.  The Wall Street bankers did not earn this money and they did not deserve this money.  We were told that if Wall Street did not get this money that the global economy would collapse and that there would be martial law in the streets.  We were promised that this money would “fix” Wall Street and then the prosperity would “trickle down” to Main Street.  So did this happen?  Of course not.

What ended up happening is that Wall Street hoarded all of this cash.  Lending to individuals and small businesses actually decreased.  The Federal Reserve started handing out gigantic piles of nearly interest-free money which many of these big Wall Street banks immediately loaned back to the U.S. government at a significantly higher rate of interest.

Talk about easy money.

Now the big Wall Street banks and the ultra-wealthy are swimming in cash and sales of luxury goods in the United States are absolutely skyrocketing.  Meanwhile, millions of “ordinary” Americans continue to slip into poverty.

So is the answer to all of this just to “tax the rich” and redistribute the wealth again by giving more handouts to the poor?

Of course not.

The American people don’t need more handouts.

What the American people desperately need are some good jobs.

But Wall Street is hoarding the cash they got during the bailouts.

It would be one thing if these big Wall Street banks had made a ton of money based on their own efforts.  It is a very American thing to be able to enjoy the fruits of hard work.

However, the truth is that many big Wall Street banks and financial institutions may have completely imploded if not for the bailouts.

They were “too big to fail” and our politicians jumped to their service.

Our politicians redistributed wealth by taking trillions of dollars that belonged to us and to future generations and handed it to the folks on Wall Street.

So now the boys and girls over on Wall Street are thriving while tens of millions of “average” Americans are desperately suffering.

Does that seem right to you?

Isn’t it about time that the U.S. government gets out of the “redistribution of wealth” business altogether?

Just consider the following statistics.  Even as the economic suffering of ordinary Americans continues to deepen, those who got big piles of bailout money are living the high life….

#1 According to Stephen Lewis of Monument Securities, luxury retailers in the United States have seen an 8.1 percent increase in sales compared to a year ago, while “discount stores” that cater to the poor and the middle class have only seen a 1.2 percent increase in sales compared to a year ago.

#2 The sad truth is that just about every company that deals in luxury goods is booming, while those that primarily serve ordinary Americans are not doing nearly as well.  Just consider the following quote from a recent article by Ambrose Evans-Pritchard of the Telegraph….

Tiffany’s, Nordstrom, and Saks Fifth Avenue are booming. Sales of Cadillac cars have jumped 35pc, while Porsche’s US sales are up 29pc.

Cartier and Louis Vuitton have helped boost the luxury goods stock index by almost 50pc since October. Yet Best Buy, Target, and Walmart have languished.

#3 Elderly Americans in particular are really having a hard time of it right now.  A recent study by a law professor from the University of Michigan found that Americans that are 55 years of age or older now account for 20 percent of all bankruptcies in the United States.  Back in 2001, they only accounted for 12 percent of all bankruptcies.

#4 The number of Americans on food stamps has hit another all-time record.  There are now 43.2 million Americans enrolled in the food stamp program.

#5 According to the U.S. Conference of Mayors, visits to soup kitchens are up 24 percent over the past year.

#6 Meanwhile, the price of food continues to go up.  This hits poor and middle class Americans much harder than it hits the wealthy.  According to a report on 55 top food commodities by the Food and Agriculture Organization, global food prices reached a new record high during December.

#7 Lester Brown, the president of the Washington-based Earth Policy Institute, is publicly declaring that the world is just “one poor harvest” away from total chaos….

“The reality is that the world is only one poor harvest away from chaos. We are so close to the edge that politically destabilizing food prices could come at any time.”

#8 The price of clothes is also increasing dramatically.  It turns out that cotton is 80% more expensive now than it was back at the beginning of 2010.

#9 Americans will also be paying more at the gas pump this upcoming year.  In fact, former Shell Oil President John Hofmeister recently stated that Americans could be paying 5 dollars for a gallon of gasoline by the end of this upcoming year.

#10 Health insurance rates are also skyrocketing.  Blue Shield of California recently announced plans to raise health insurance rates by an average of 30% to 35% this year, and some individual policy holders could actually see their health insurance premiums rise by a whopping 59 percent.

#11 On top of everything else, the U.S. Census is now telling us that there are millions more poor people in America than they had previously calculated.  The U.S. Census Bureau recently revealed that the figure of 43.6 million Americans living in poverty that they announced last September was way too low and that actually 47.8 million Americans are now living in poverty.

#12 If all of these economic problems were not bad enough, now many state and local governments are seriously considering raising taxes.  In Illinois, there is now a proposal to raise state income tax rates by 75 percent.  A recent article that appeared on the CNBC website explained why Illinois is so desperate for cash….

In a moment when states around the country are wrestling with withered revenues, Illinois faces a deficit of at least $13 billion; more than $6 billion in unpaid bills to social service agencies, schools and funeral homes; the most underfinanced state pension system; and growing signs of concern from bond investors.

So won’t the big Wall Street banks and the ultra-wealthy get hit by these tax increases too?

Some of them will, but many of them have learned to “play the game” so well that they barely pay any taxes at all.

As I have written about previously, a third of all the wealth in the world is now held in offshore banks.  When taxes go up, the ultra-wealthy are not the ones that have their wealth “redistributed”.  Instead, it is poor saps like you and I that have our wealth “redistributed”.

In fact, the next time another “financial crisis” comes along, the financial “powers that be” will once again come running to Congress and come running to the Federal Reserve begging for more bailouts.

Now that the precedent has been set, it will only seem natural to redistribute even more of our wealth to the folks over on Wall Street so that we can “save” the financial system.

But the truth is that our financial system is completely doomed to fail in the long run and throwing our money into the financial system is like throwing our money into a black hole.

In the end, all of us are going to greatly suffer when the financial system finally crashes.  But for the moment the wealthy are partying with all of the money that they have looted from the rest of America, and the rest of us which were “small enough to fail” have been left to scratch and claw and fight with each other as we desperately try to survive in this horrible economy.

The Economic Collapse

Bailout “Star” Joe Donnelly (D-IN) says bank bailouts are “good for America.”

Political Toxic Asset Test — How did your representatives vote on TARP?

• House TARP vote list

• Senate TARP vote list

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By Dr. Pitchfork

In 2008, few of the Congressional incumbents who ran for re-election were held accountable for voting “yes” on TARP.  Fast forward two years and that TARP vote is the most toxic asset they own.

In 2008, there was only a month between the passage of the TARP legislation and Election Day.  Unless they were accustomed to following the financial markets, most voters were still trying to figure out what the financial crisis was all about and why Congress appropriated $700B to “fix” the problem.  Two years later, with unemployment hovering around 10%, the national debt out of control and the Wall St. bonus train back in high gear, voters are rightly ticked off.  And incumbents who panicked and voted for the bank bailout are about to pay the price.

One of those incumbents is Joe Donnelly (D) of Indiana’s 2nd district.  Like most of those in Congress who voted for the bailout, he remains adamant that TARP helped prevent an “economic depression,” and that by standing up to his own constituents and voting against their wishes, he did the right thing.

Donnelly says that Jackie Walorski (R), his Tea Party-backed oppenent:

• “obviously does not understand that, without these steps [i.e. TARP], credit would have completely frozen up, there would have been no loans available, there would have been bank collapses across the cocuntry and there would have been a global economic collapse.”

Readers of The Daily Bail know the deal, but just for kicks let’s unpack this statement of Donnelly’s.  Some members of Congress probably voted for TARP for purely cynical reasons, but Donnelly could be the poster boy for dumb bailout votes – he’s clearly swallowed the Bernanke-Paulson story, hook, line and sinker.  Let’s help him out a little, with some cold, hard bailout facts.

• First, interbank lending DID NOT “freeze,” nor did TARP prevent it from “freezing.”  As researchers from FRBNY and MIT have shown, right through the entire crisis period, hundreds of billions of dollars were loaned in the interbank market – and paid back –  EVERY SINGLE DAY.  Both before and after Lehman, both before and after TARP.

• Second, there was never a choice between A) passing TARP and B) doing absolutely nothing while the world burned.  Donnelly seems to actually believe that’s the choice he had.  What a rube.

• Third, other means of stabilizing the financial system, besides TARP, could have been used.  How do we know?  Because they were being used AT THE VERY SAME TIME that TARP was being debated and then implimented.  The Treasury, for example, stopped Paul Kanjorski’s fabled “electronic run” on the money market funds by issuing a blanket guarantee of all money market funds on September 19 – before TARP was even passed!  The Fed intervened in the commercial paper market and nipped that problem in the bud lickety split – no need for TARP there.   Though TARP raised the FDIC limit to $250K, new legislation wasn’t needed for the FDIC to guarantee all bank deposits under a systemic risk exception – which Bair, Paulson, et al. declared almost immediately after the bailout bill was passed. Further, the FDIC also initiated the TLGP to protect bank creditors, but it could have covered bank creditors in any case under the same systemic risk exception under which it protected depositors – and not in any way, shape or form did TARP have anything to do with it.

• Fourth, the TARP funds were originally intended for the purchase of “toxic assets” from the banks.  That’s how the bill was sold, and that’s what Congress (including Joe Donnelly) voted for.  But this plan could only “work” if taxpayers over-paid for the assets.  If taxpayers paid less than they were worth, the banks would have had no reason to sell them.  Even a panic-stricken Congressman should have known that TARP was a dumb idea just from a basic accounting perspective.  But even if you agree with Paulson’s decision to take equity stakes in the banks instead, why take that step when regulatory forbearance or a change in FAS 157 would have had the same effect WITHOUT spending taxpayer dollars?  Of course, FAS 157 was eventually changed, and with the help of Bernanke’s gift of zero interest rates, most banks paid back TARP.  What a convoluted waste.

At this point, can someone please explain to me how “global economic collapse” comes into the picture?  Everything that TARP is credited with having done, was actually achieved through actions requiring no legislation and had nothing to do with an ass-backwards capital purchase program.  Anyone?

The funniest thing about Joe Donnelly’s bailout vote is that in the fall of 2008 he was telling everyone (all tough like) that “We’re going to get the Wall St. people who did this.”  Oh yes, folks, heads were going to roll.  People were going to pay the price.  Joe Donnelly was going to…   Joe Donnelly hopes you forget he said all that.  Most of the TARP bank executives are still running the firms they nearly ran into the ground, picking up multi-billion-dollar bonuses last year with the help of taxpayer subsidies, while the rest (like Ken Lewis) left with their golden parachutes.

Further, Donnelly claimed that taxpayers would get every single penny of TARP money paid back, even from AIG.  Really?  Even Tim Geithner doesn’t make that claim, anymore.  And what about the fact that much of the banks’ risk has the potential to be foisted right back onto the taxpayer by way of Fannie and Freddie – whose taxpayer credit card limit was upped to INFINITY on Christmas Eve last year?  I suspect Donnelly doesn’t even know half of what’s gone on since he voted for a bailout bill he obviously didn’t understand.  (Here he is simpering about naked credit default swaps in March of 2009, but talk is cheap — ask Obama.)  Jackie Walorski, or any candidate who makes bank bailouts a campaign issue, should beat Donnelly handily.  May he be the first of many!

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Tea Party candidate Jackie Walorski (R-IN) sits down with the locals for a cup of Joe.  Donnelly is most likely right — she probably doesn’t understand bank bailouts any more than he does.  But she’s right to oppose them, and doing so is going to get her elected.

The DailyBail