GREED-SPAN

Banks Are Likely to Hold Tight to Bailout Money
By LOUISE STORY and ERIC DASH
Published: October 16, 2008

Even as the government moves to plug holes in the nation’s banks, new gaps keep appearing.

As two financial giants, Citigroup and Merrill Lynch, reported fresh multibillion-dollar losses on Thursday, the industry passed a grim milestone: All of the combined profits that major banks earned in recent years have vanished.

Since mid-2007, when the credit crisis erupted, the country’s nine largest banks have written down the value of their troubled assets by a combined $323 billion. With a recession looming, the pain is unlikely to end there. The problems that began with home mortgages, analysts say, are migrating to auto, credit card and commercial real estate loans.

The deepening red ink underscores a crucial question about the government’s plan: Will lenders deploy their new-found capital quickly, as the Treasury hopes, and unlock the flow of credit through the economy? Or will they hoard the money to protect themselves?

John A. Thain, the chief executive of Merrill Lynch, said on Thursday that banks were unlikely to act swiftly. Executives at other banks privately expressed a similar view.

“We will have the opportunity to redeploy that,” Mr. Thain said of the new capital on a telephone call with analysts. “But at least for the next quarter, it’s just going to be a cushion.”

Granted, the banks are in a deep hole. For every dollar the banks earned during the industry’s most prosperous years, they have now wiped out $1.06.

Even with the capital from the government, analysts say, the banking industry still needs to raise around $275 billion in light of the looming losses.

But Treasury Secretary Henry M. Paulson Jr. is urging them to use their new capital soon. On Monday, Mr. Paulson unveiled plans to provide $125 billion to nine banks on terms that were more favorable than they would have received in the marketplace. The government, however, has offered no written requirements about how or when the banks must use the money.

“There is no express statutory requirement that says you must make this amount of loans,” said John C. Dugan, the comptroller of the currency. “But the economics work so that it is in their interest to do so.”

Mr. Dugan added that he would not examine how the banks used the money, but he said their actions would “be open to the court of public opinion.”

The banks could use the money from the government for any number of things. Some analysts say the banks may use it to acquire weaker competitors. Others say they might use it to avoid painful cost-cutting. And still others say the banks may sit on the capital.

Lenders have been pulling back on credit lines for businesses, mortgages, home equity loans and credit card offers, and analysts said that trend was unlikely to be reversed by the government’s money.

“I don’t think that the market wants to see that capital being put to work to leverage the business up again,” said Roger Freeman, an analyst at Barclays Capital, which acquired parts of the now-bankrupt Lehman Brothers last month. “My expectation is it’s quarters off, not months off, before you see that capital being put to work.”

Many banks are still plagued by past excesses. Losses on a variety of different types of loans of all sorts are growing and spreading beyond the country’s borders. Citigroup and Merrill Lynch have each lost money every quarter in the last year, as deteriorating assets wiped out revenue.

Merrill, which is in the process of merging with Bank of America, reported a $5.15 billion loss, dragged down by about $12 billion in write-downs.

Citigroup lost $2.82 billion, as its $13.2 billion in charges related to credit losses more than overwhelmed every bit of revenue that the bank generated. And analysts say Citigroup is likely to face several more quarters of loan losses as the global economy slows.

Every corner of the economy goes through cyclical ups and downs. But the banking downturn has acted with ferocious speed to erase past profits.

In the case of the nine-largest commercial banks — Citigroup, Merrill Lynch, Bank of America, Morgan Stanley, JPMorgan Chase, Goldman Sachs, Wells Fargo, Washington Mutual and Wachovia — profits from early 2004 until the middle of 2007 were a combined $305 billion. But since July 2007, those banks have marked down their valuations on loans and other assets by just over that amount.

“The losses now are showing that in some sense the profits reported in earlier years were not real, because they were taking too much risk then,” said Richard Sylla, an economist and financial historian at the Stern School of Business at New York University.

Mr. Sylla said that the average profit of the financial industry in the first decade of this century will be abysmal, despite the fact that there were a handful of record years in the middle.

SOURCE: http://www.nytimes.com/2008/10/17/business/17bank.html

The War On Terror Is A Hoax

By Paul Craig Roberts

February 04, 2009 Information Clearinghouse” — – According to US government propaganda, terrorist cells are spread throughout America, making it necessary for the government to spy on all Americans and violate most other constitutional protections. Among President Bush’s last words as he left office was the warning that America would soon be struck again by Muslim terrorists.

If America were infected with terrorists, we would not need the government to tell us. We would know it from events. As there are no events, the US government substitutes warnings in order to keep alive the fear that causes the public to accept pointless wars, the infringement of civil liberty, national ID cards, and inconveniences and harassments when they fly.

The most obvious indication that there are no terrorist cells is that not a single neocon has been assassinated.

I do not approve of assassinations, and am ashamed of my country’s government for engaging in political assassination. The US and Israel have set a very bad example for al Qaeda to follow.

The US deals with al Qaeda and Taliban by assassinating their leaders, and Israel deals with Hamas by assassinating its leaders. It is reasonable to assume that al Qaeda would deal with the instigators and leaders of America’s wars in the Middle East in the same way.

Today every al Qaeda member is aware of the complicity of neoconservatives in the death and devastation inflicted on Muslims in Iraq, Afghanistan, Lebanon and Gaza. Moreover, neocons are highly visible and are soft targets compared to Hamas and Hezbollah leaders. Neocons have been identified in the media for years, and as everyone knows, multiple listings of their names are available online.

Neocons do not have Secret Service protection. Dreadful to contemplate, but it would be child’s play for al Qaeda to assassinate any and every neocon. Yet, neocons move around freely, a good indication that the US does not have a terrorist problem.

If, as neocons constantly allege, terrorists can smuggle nuclear weapons or dirty bombs into the US with which to wreak havoc upon our cities, terrorists can acquire weapons with which to assassinate any neocon or former government official.

Yet, the neocons, who are the Americans most hated by Muslims, remain unscathed.

The “war on terror” is a hoax that fronts for American control of oil pipelines, the profits of the military-security complex, the assault on civil liberty by fomenters of a police state, and Israel’s territorial expansion.

There were no al Qaeda in Iraq until the Americans brought them there by invading and overthrowing Saddam Hussein, who kept al Qaeda out of Iraq. The Taliban is not a terrorist organization, but a movement attempting to unify Afghanistan under Muslim law. The only Americans threatened by the Taliban are the Americans Bush sent to Afghanistan to kill Taliban and to impose a puppet state on the Afghan people.

Hamas is the democratically elected government of Palestine, or what little remains of Palestine after Israel’s illegal annexations. Hamas is a terrorist organization in the same sense that the Israeli government and the US government are terrorist organizations. In an effort to bring Hamas under Israeli hegemony, Israel employs terror bombing and assassinations against Palestinians. Hamas replies to the Israeli terror with homemade and ineffectual rockets.

Hezbollah represents the Shi’ites of southern Lebanon, another area in the Middle East that Israel seeks for its territorial expansion.

The US brands Hamas and Hezbollah “terrorist organizations” for no other reason than the US is on Israel’s side of the conflict. There is no objective basis for the US Department of State’s “finding” that Hamas and Hezbollah are terrorist organizations. It is merely a propagandistic declaration.

Americans and Israelis do not call their bombings of civilians terror. What Americans and Israelis call terror is the response of oppressed people who are stateless because their countries are ruled by puppets loyal to the oppressors. These people, dispossessed of their own countries, have no State Departments, Defense Departments, seats in the United Nations, or voices in the mainstream media. They can submit to foreign hegemony or resist by the limited means available to them.

The fact that Israel and the United States carry on endless propaganda to prevent this fundamental truth from being realized indicates that it is Israel and the US that are in the wrong and the Palestinians, Lebanese, Iraqis, and Afghans who are being wronged.

The retired American generals who serve as war propagandists for Fox “News” are forever claiming that Iran arms the Iraqi and Afghan insurgents and Hamas. But where are the arms? To deal with American tanks, insurgents have to construct homemade explosive devices out of artillery shells. After six years of conflict the insurgents still have no weapon against the American helicopter gunships. Contrast this “arming” with the weaponry the US supplied to the Afghans three decades ago when they were fighting to drive out the Soviets.

The films of Israel’s murderous assault on Gaza show large numbers of Gazans fleeing from Israeli bombs or digging out the dead and maimed, and none of these people are armed. A person would think that by now every Palestinian would be armed, every man, woman, and child. Yet, all the films of the Israeli attack show an unarmed population. Hamas has to construct homemade rockets that are little more than a sign of defiance. If Hamas were armed by Iran, Israel’s assault on Gaza would have cost Israel its helicopter gunships, its tanks, and hundreds of lives of its soldiers.

Hamas is a small organization armed with small caliber rifles incapable of penetrating body armor. Hamas is unable to stop small bands of Israeli settlers from descending on West Bank Palestinian villages, driving out the Palestinians, and appropriating their land.

The great mystery is: why after 60 years of oppression are the Palestinians still an unarmed people? Clearly, the Muslim countries are complicit with Israel and the US in keeping the Palestinians unarmed.

The unsupported assertion that Iran supplies sophisticated arms to the Palestinians is like the unsupported assertion that Saddam Hussein had weapons of mass destruction. These assertions are propagandistic justifications for killing Arab civilians and destroying civilian infrastructure in order to secure US and Israeli hegemony in the Middle East.

Paul Craig Roberts was Assistant Secretary of the Treasury during President Reagan’s first term. He was Associate Editor of the Wall Street Journal. He has held numerous academic appointments, including the William E. Simon Chair, Center for Strategic and International Studies, Georgetown University, and Senior Research Fellow, Hoover Institution, Stanford University. He was awarded the Legion of Honor by French President Francois Mitterrand. He is the author of Supply-Side Revolution : An Insider’s Account of Policymaking in Washington; Alienation and the Soviet Economy and Meltdown: Inside the Soviet Economy, and is the co-author with Lawrence M. Stratton of The Tyranny of Good Intentions : How Prosecutors and Bureaucrats Are Trampling the Constitution in the Name of Justice.

SOURCE: http://www.informationclearinghouse.info/article21906.htm