Trading for Toxic Assets

“This time, the banks, especially the smaller banks, went to their Congress people and said, "The reason we can't lend is because they say we don't have enough capital. But we would have enough capital if they just would let us value these assets at what we think they're really worth." And that got a really good reception in Congress” states Floyd Norris chief financial correspondent for the NY Times.

The week before that, when Treasury Secretary Tim Geithner announced the plan for the government funded selling of these toxic assets said “The alternative approach is we should have the government buying all this stuff, taking on all the risk on their balance sheet, which would be much more expensive to the taxpayer. The alternative of letting it just sit there, let these assets just sit on the balance sheets of banks, would risk creating a much longer, deeper recession.

On the bail out of AIG Federal Reserve Chairman Ben Bernanke said “At best, the consequences of AIG's failure would have been a significant intensification of an already severe financial crisis and a further worsening of global economic conditions. Conceivably, its failure could have resulted in a 1930s-style global financial and economic meltdown, with catastrophic implications for production, income and jobs.”

Sounds like blackmail to me, especially when one understands that Goldman Sachs recipient of 12 billion in the AIG bail out owns oil pipelines, terminals, and an oil refinery in Kansas and natural gas wells in PA, W. VA, TX, OK, LA and is the new owner of Cobalt International Energy a firm run by former Unocal (originally Standard Oil of California) executives.

In 2005 Peter Fusaro and Gary Vasey of the International Research Center for Energy and Development said “The proprietary trading desks of (Goldman Sachs, Bank of America and Morgan Stanley) and other large investment banks are actually ‘hedge funds in drag’ just as Enron was.”

The banks are moving aggressively into energy trading and the leaders are investment banks Morgan Stanley and Goldman Sachs. Now we’re bailing them out and if we don’t, we’re being threatened with a longer depression.

All these banks have other divisions especially in the unregulated energy trading which make money like in their oil and gas divisions. Why not take some of the profits from these money making divisions and give that back to the tax payer? Why do we get threats of a deeper recession and toxic assets? Why don’t we get any of the cream?

Why?… Because for decades the power and the wealth have been steadily consolidated into the hands of the few that brought us these toxic assets. These banks can pay for their own mistakes but because they have the power, and the wealth to back it up they’re forcing us into paying for them. This is the real reason this recession-depression won’t end and not because their toxic assets don’t have more value but, because they own all the assets (including our government ) both toxic and profitable, furthering the gap between rich and poor.