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The Senate’s Coronavirus Relief Package Must be Stopped!
By Mike Whitney
Global Research, March 27, 2020
Region: USA Theme: Global Economy, Law and Justice, Science and Medicine
The Senate’s $2 Trillion Coronavirus Relief Package is not fiscal
stimulus and it’s not a lifeline for the tens of millions of working
people who have suddenly lost their jobs. It’s a fundamental
restructuring of the US economy designed to strengthen the grip of the
corrupt corporate-banking oligarchy while creating a permanent
underclass that will be forced to work for slave wages. This isn’t
stimulus, it’s shock therapy.
Who can survive on $1,200 for one, two or three months time? And what
happens to the millions of people who paid no taxes last year? Are they
supposed to scrape by on nothing? Congress knows that most households
live paycheck to paycheck. With no savings how will they pay the rent,
the electric bill, the phone and the cable? Congress is quibbling over
an extra $600 per month unemployment for those who are lucky enough to
get it, when most people are just trying to figure out how they’re going
to survive, how they’re going to pay the mortgage, when they’ll be able
to go back to work, and whether their job will still be there when this
nightmare is finally over?
Did you know that “if you don’t already have direct-deposit information
on file with the IRS from previous tax returns, you won’t get the
emergency funds for up to 4 months”? That means millions of people will
have zero income for 4 months! What will become of them? Where will they
go? Who will provide them with shelter and food? Shouldn’t congress be
asking these questions?
And what happens to the 50% of the American people who had less than
$400 saved before the crisis hit? What happens to them when they fall
between the cracks and lose their apartments, lose their jobs, and lose
their ability to maintain their tenuous standard of living? These people
will never regain their financial footing. Never. It’s a death sentence.
We’re going to see an explosion of homelessness, drug addiction,
depression, alcoholism, suicide and crime unlike anything this country
has ever seen before. Are the imbeciles in congress so blind that they
can’t see that they’re condemning a large part of the population to
permanent, inescapable, grinding poverty and desperation? Can’t they see
that?
Do you understand why this bill is being rushed through congress?
It has a lot to do with the falling stock market but more precisely with
the hundreds of corporations that have been hawking bonds to gullible
investors who thought they were buying the debt of responsible,
well-managed companies that used the money to improve their
product-line, train workers, or build new factories. But instead, greedy
CEOs have been using the money to buy shares in their own companies to
boost executive compensation and reward shareholders. It’s a
multi-trillion dollar scam that blew up in their faces causing a
complete freeze-over in the corporate bond market. That’s what’s really
going on, there’s a massive credit crunch that has a stranglehold on the
bond market and there are only two ways to fix the problem:
Let the failing corporations default and pick up the pieces after the
dust settles or… Launch a major $4.5 trillion bailout for busted
corporations that drove their companies off a cliff.
Those are the two choices. Naturally Treasury Secretary Mnuchin chose
the latter which suggests that the real motive for giving working people
the $1,200 checks was simply to divert attention from the massive
trillion dollar bailout to teetering corporations. That’s the real
objective of the so-called fiscal stimulus bill. It’s another giant
welfare check for the plutocrats.
The centerpiece of the new legislation is a provision for $425 billion
giveaway to big business. The New York Times explains what is going on
in a recent article. Here’s an excerpt:
“Republican senators have suggested creating a fund of $425 billion at
the Treasury Department that the Fed could use to back emergency lending
facilities — which would enable such programs to grow far beyond that
scale.
Because the Fed cannot take on substantial credit risk itself, the
Treasury Department backs its emergency lending, using money from a fund
that contains just $95 billion. Treasury Secretary Steven Mnuchin on
Sunday suggested that the new money in the Republican bill could be
leveraged by the Fed to back some $4 trillion in financing.
“We do have limited amounts of money we’re using before Congress passes
this bill, so we’re not waiting on Congress,” Mr. Mnuchin said in an
interview on CNBC on Monday. “As Congress gives us the authority, we’ll
be increasing the facilities substantially.” (“The Fed Goes All In With
Unlimited Bond-Buying Plan”, New York Times)
What does it mean?
It means that Mnuchin is transforming the US Treasury into a hedge fund.
That’s what it means. It means that the Treasury is going to use the
$450 billion that is obliquely allocated in the emergency bill, to
create a Special Purpose Vehicle (SPV)–which is a sleazy, off-balance
sheet operation that is used to conceal underhanded bookkeeping, that
will leverage up by 10x (which means that the Fed will use the $450
billion to borrow tens times more than the original amount or $4.5
trillion) that will be stealthily used to bail out underwater
corporations, financial institutions and, yes, banks. (Note–The
fairy-tale about “well capitalized banks” is pure bunkum. These guys
have serious exposure through “sponsored repo” which is lending to hedge
funds via the repo market.) The Fed has already created one SPV for the
Commercial Paper market under the Treasury’s Exchange Stabilization Fund
(ESF) which is supposed to be used to mitigate volatility in global
currency markets, not for bailing out failing corporations. It’s a
complete misuse of funds. Unfortunately, targeted suspension of the
Sunshine Act will prevent the public from figuring out who is getting
money in what amount and for what purpose. This whole scam has been
carefully worked out right down to legal provisions preventing
transparency.
By the way, Mnuchin’s personal bio is worth reviewing. According to
Senator Ron Wyden:
“Mr. Mnuchin’s career began in trading the financial products that
brought on the housing crash and the Great Recession. After nearly two
decades at Goldman Sachs, he left in 2002 and joined a hedge fund….
“In early 2009, Mr. Mnuchin led a group of investors that purchased a
bank called IndyMac, renaming it OneWest. OneWest was truly unique.
While Mr. Mnuchin was CEO, the bank proved it could put more vulnerable
people on the street faster than just about anybody else around.
“While he was CEO, a OneWest vice president admitted in a court
proceeding to ‘robo-signing’ upward of 750 foreclosure documents a
week…between 2009 and 2014, a period during which the bank foreclosed on
more than 35,000 homes. ‘Widow foreclosures’ on reverse mortgages –
OneWest did more of those than anybody else. The bank defends its record
on loan modifications, but it was found guilty of an illegal practice
known as ‘dual tracking.’ One bank department tells homeowners to stop
making payments so they can pursue modification, while another
department presses on and hurtles them into foreclosure anyway.”
(“Stimulus Bill: The Fed and Treasury’s Slush Fund Is Actually $4
Trillion”, Wall Street on Parade)
Does that sound like someone who can be trusted in the distribution of
$4.5 trillion in government funds?
The media is not even trying to hide the sordid details of what’s going
on behind the scenes. Take a look at this excerpt from an article at
Bloomberg:
“The Federal Reserve could now have as much as $4.5 trillion to keep
credit flowing and make direct loans to U.S. businesses through the
massive coronavirus stimulus bill being considered by U.S. lawmakers.
The bipartisan agreement, which still needs to be passed by the Senate
and House and signed into law by President Donald Trump, will include
$454 billion in funds for the Treasury to backstop emergency actions by
the Fed to support the U.S. economy, Senator Patrick Toomey said on
Wednesday.
The central bank will work with the U.S. Treasury to use that money as a
backstop against credit risk as it supports markets for corporate and
short-term state and local debt, while also loaning directly to large
and medium-sized businesses….
“It is a very, very big thing; it is unprecedented,” the Pennsylvania
Republican told reporters Wednesday on a conference call, adding it was
an opportunity to lever up “the unlimited balance sheet of the Fed.”
Toomey’s comments suggest Fed facilities could be expanded with the new
funds, in effect doubling the Fed’s current $4.7 trillion balance sheet
if necessary. On Sunday, Treasury Secretary Steven Mnuchin said the bill
would provide up to $4 trillion in liquidity through broad-based lending
programs operated by the Fed.” (“Fed’s Anti-Virus Lending Firepower
Could Reach $4.5 Trillion”, Bloomberg)
Toomey is an idiot! Can’t he see what’s going on? Why does he say: “This
is a very, very big thing.”… “an opportunity to lever up “the unlimited
balance sheet of the Fed”??? Doesn’t he know that the US Treasury has
now accepted full liability and credit risk for the Fed’s emergency
bailout operations. Does he like the idea that the American people will
now be on the hook for the CEOs who blew up their own companies to
fatten their own bank accounts?? That’s what this means. Readers should
parse these articles very carefully, word by word, phrase by phrase. The
ugly truth is spelled out in black and white. Here’s the key phrase in
the Times article:
“Because the Fed cannot take on substantial credit risk itself, the
Treasury Department backs its emergency lending.”
And here’s the key phrase in the Bloomberg article: “The central bank
will work with the U.S. Treasury to use that money as a backstop against
credit risk as it supports markets for corporate and short-term state
and local debt, while also loaning directly to large and medium-sized
businesses.”
There it is: Credit risk, credit risk, credit risk. Who assumes the
credit risk for this $4.5 trillion dollar giveaway??
The American taxpayer. Look: The Fed has always had the ability to print
as much money as it chooses. (Remember: “Unlimited QE”??) So why did the
Fed need to link-up with the Treasury for this operation?
Because the Fed is unwilling to accept the credit risk. Who will
ultimately be accountable for all the bad bets and worthless bonds that
are being downgraded as we speak? Who is going to mop up the trillions
in red ink created by crooked, scheming, cutthroat corporations (and
their financial counter-party accomplices) who plundered their companies
for the sole objective of enriching themselves and their shareholders?
Who?
The US Treasury backed by the American taxpayer.
This is really the endgame. Wall Street has subsumed the US Treasury and
turned it into a massively leveraged hedge fund that is controlled by an
unscrupulous charlatan who made his bones evicting families from their
homes during the worse economic slump since the Great Depression.
We’re truly fu**ed.
NOTE– As this was being written, stocks were shooting higher for a third
consecutive day due, in large part, to the easing of credit spreads in
the corporate bond market. According to Matt Maley, chief market
strategist at Miller Tabak, “They’ve been able to come into the credit
markets and stabilize that area; we see credit spreads starting to
tighten up a little bit…..The fact that they’re starting to stabilize
gives people the kind of confidence they need to be able to dip their
toes back into the market at a time when we absolutely need it.”
In other words, the bailout appears to be working for the investor
class. Yipee.
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