Monday, September 15, 2008

Lehman Trickles Down and Out

Lehman Brothers has filed for bankruptcy becoming the largest financial firm to fail in the credit crisis.... a crisis fueled by shoddy sub-prime lending practices.... producing "Massive Shifts on Wall Street" (WaPo) .... and a domino effect globally as "World Stock Markets Sink.." on the news. (WaPo)

We now know the reality of the Bush/McSame "trickle down" economy where corporations rule.

It's our savings and stock portfolios that have been trickling down and away as the Bush administration's unregulated house-of-cards economy implodes, while greedy fat cats in investment banks and brokerage houses reap obscene benefits from their risky business practices and then exit unscathed leaving stockholders and taxpayers holding the trickled-away bag.

Paul Krugman in his op-ed in The New York Times calls this trickle-down scam "Financial Russian Roulette."

In our new Russian Roulette economy, the old world of banking in which "institutions housed in big marble buildings accepted deposits and lent the money out to long-term clients, has largely vanished, replaced by what is widely called the 'shadow banking system.'"

The marbled-hall banks now play only a minor role in channeling funds, "most of the business of finance is carried out through complex deals arranged by 'nondepository' institutions, institutions like the late lamented Bear Stearns - and Lehman," Krugman explains.

While there were many warning signs.... like housing bankruptcies on a massive scale, and the bailout of investment bank Bear Stearns six months ago.... still the Bush administration didn't respond by putting in place a mechanism for orderly liquidation of troubled banks, or at the very least regulation of the shadow banking system. "If institutions need to be rescued like banks, they should be regulated like banks," Krugman reasons.

Instead, The Denier and McSame just keep double-talking, "the fundamentals of our economy are strong." After all, McSame wants the White House and The Denier wants his legacy... so don't expect any economic straight talk about the real effects of their corporate-loving trickle-down debacle.


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