Slap in the Face to Joe Main Street

The Morgan Stanley - Citi Merger

If ever there was a merger that proves that we have become a country "of the investor, by the investor, and for the investor," it's the Citi/Morgan Stanley merger. I suspect that Abe Lincoln would feel as I do that this is a perversion of what he meant during his famous Gettysburg address**

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Keep in mind that Citi has been claiming injury by the mortgage crisis to which it was a huge contributor in creating. This merger will create the largest brokerage on the planet with $1.7 trillion in "client" assets.

Say that aloud: "one point seven trillion dollars in client assets" That means that while on Main Street U.S.A unemployment is climbing and most of us are making decisions to pay the utilities or buy groceries at times, investors still have, and must be hoarding $1.7 trillion dollars. This probably a pretty good indication as to where the $350 billion of the $700 billion Bailout Funds have gone.

Now if you read the news blurbs, they indicate that this merger will service 1.6 million households "globally" That word globally is important because thought 6.8 million sounds impressive, it means that this merger will only be beneficial to .024 percent of the world population it is serving. That's two percent of one percent. That means that less than one percent of the world population.

It also means that these few investors hold assets that are nearly four times our national debt of $455 billion. The paradigm of the current administration has place our country in debt to line the pockets of a very few investors. It also means that these few investors and we are only talking about the clients of the Citi/Morgan Stanley merger, hold assets that are 42 times the trade deficit the country currently faces. That means if we were to ask Citi/Morgan Stanley's clients to pay off the deficit, they would still have $1.66 trillion. Say that aloud. one point six trillion dollars

The reason this last factoid is important is because this trade deficit was created in large part by large manufacturing off shoring it's workforce in order to reduce overhead and line the pockets of investors. Although, if you were to listen to them, it was to survive. Of course, survival really was dependent on huge profit returns to investors, despite the impact on Joe Main Street jobs. The irony of this being missed by large manufacturing in their greed is that as you move your workforce offshore, jobs drop off and when jobs drop off, so does your consumer base, which is exactly what we are seeing in this new recession: A middle class no longer able to forward the economy by keeping cash flow moving. In other words, a middle class no longer able to function as a middle class

When are we going to finally realize that whatever we do to improve the economy, we need to move away from the supply side paradigm of pandering to the investors. We need to bring back jobs and build an economy based on products and Joe Main Street.


** "Of the people, by the people and for the people"

Nobel Winning Economist is Terrified....

...of "The mentality that what's good for Goldman Sachs is good for all Americans.

by

Conrad Lawrence

As an economist Nobel winning economist, Paul Krugman is s amazed. As a citizen he's terrified.
"The problems are bigger than we grasped," Krugman explained to Renee Montagne of NPR's Morning Edition. "No one understood how vulnerable this 21st Century structure really is." He was, of course, referring to the credit based economy that this country has adopted and described the meltdown as being created by greed followed by fear. Greedmanifested by rushing into a housing bubble to make money, despite nearly a decade of warnings. Panic when it fell apart. (More Below)
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And like Guy Cecala, who publishes an industry newsletter called Inside Mortgage Finance, Krugman is worried that the current bailout will not fix the crisis. He claims that things will get substantially worse; things will spiral down. A lot of people who are middle class will no longer be middle class. Not sure where Krugman's been the last year. Both Cecala and Krugman indicate that the problem with the bail out is that it does nothing to keep homeowners in their homes. Cecala describes two plans meant to infuse money at the level of the homeowner to keep the current loan cycle pumping, much like the Alternative Bailout Plan described to the side. He asks if you take homes off line, how will that help the housing market, a component everyone agrees is needed for sustained growth out of this crisis. Krugman see issues with the top down approach of the bail out by giving money to banks and further leaving them go unregulated.

Gutted by Bush

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Big problem with the current bail out according to Krugman is that in terms of regulating the financial industries natural tendency toward unsensible greed, the Treasury Department has been gutted by the Bush Administration. The Treasury Department, "doesn't have the deep understanding that comes from employing burearocrats who know what they are doing." The Bush Administration has systematically removed those people and Greenspan helped create a dangerous illusion of security when in fact there wasn't
enough.

Krugman feels that there is a need for regulating the banks and the financial industry and comments on where the two candidates fall in that paradigm. According to Krugman, McCain is still trying toshoe horn this bailout into his perception that
government is too big. He starts talking about earmarks which baffles Krugman since earmarks has nothing to the credit based financial crisis. Krugman feels that Obama is a regulation guy, despite not always voting for regulation, but sees him intellectually more flexible and willing to admit that it is FDR time

In a way that indicates an answer to Cecala's big question concerning a homeowner's bail out: Do we let the banks still hold the mortgages or give them over to some government entitity?