The Long Crisis

Posts Tagged ‘Al Jazeera’

Samah El-Shahat, Al Jazeera’s resident economist, has written a series of insightful articles about the ongoing worldwide financial crisis. Al Jazeera has become, believe it or not, one of the world’s leading hard news organizations, and has hired first class talent from around the world. Al Jazeera presents the news in an old fashioned way, the way the American major networks used to do before the age of spin set in.

Samah El-Shahat is astonished, as I am, that the goal of the Obama administration, and indeed the entire Western world governments, seems to be to turn back the clock to 2006 instead of actually fixing the structural problems that got us into this financial mess in the first place.

She also believes that much of the “green shoot” talk, at least at this stage, is just so much nonsense. The actions being taken by the US and other governments is actually setting the stage for another meltdown. How can anyone believe that problems caused by too much debt and leverage can be fixed by adding more debt and leverage to the system and raping the taxpayers along the way to the benefit of the bankers and elites?

Now for Ms Samah El-Shahat’s take on the issue.

====================================
Business as Usual

So I am still astonished that that governments are still hell-bent on maintaining the status quo, the business as usual approach that got us into this mess in the first place.

Has a single bank management been made to change despite being the source of the mess? Has a single bank been truly nationalised in the real sense of the word? Has any real clean audit of a bank happened? And please let’s not bring up stress tests that were made to make sure everyone passes…

For every one of those questions the answer is a loud and resounding NO.

Some of the banks are now being allowed to payback some bailout money – banks such State Street and JP Morgan Chase. But they are being allowed to do so without revealing the extent of the toxic assets on their balance sheets.

“I fear these banks are walking time bombs… freed from any noose or hold the government had over them because they have paid back their bailout”
We are none the wiser than we were at the start of this crisis as to how truly ‘insolvent’ they are.

Yes, I hate to bring up that word but just because they are paying back some Treasury Asset Relief Program money doesn’t make them healthy. Remember, they are using taxpayer money to pay the taxpayer back.

The Obama administration had a plan to get rid of these toxic assets called the Public Private Partnership Investment Partnership – the PPIP.

And even though the PPIP gave investors and Wall Street incredible inducements, and huge taxpayer subsidies to buy and sell these toxic assets, the banks did not play ball.

The plan was laid to rest last week, which is extraordinary because it was the central plank of the Obama administration’s plan to rescue the banks.

I think this is disastrous. Not because I liked the PPIP, I thought it was grossly unfair and I agree with the economists Paul Krugman and Joseph Stiglitz when they said it transferred taxpayers money to the banks.

But at least the PPIP tried to deal with the toxic assets that got us into this mess in the first place.

Now I fear that these banks are walking time bombs, which are now walking away, freed from any noose or hold the government had over them because they have paid back their bailout.

And if we do not get an economic recovery soon, the toxic assets on the banks’ balance sheets will detonate and bring us all down with them.

The banks are gambling on the green shoots of a miraculous economic recovery, which I think is delusional and shame on those in power for allowing them yet another chance to gamble with our economic futures.
=============================
For the complete article visit the Al Jazeera website.

Tweet This Post