Monday, May 11, 2009

DOJ to crack down on Bloated Parasites

The Stock market was down significantly today and the corporate news readers promptly blamed this on the announcement from the DOJ that they will do away with the Bush Crime Family policy of not enforcing the Antitrust laws under any circumstances. A DOJ spokesman linked our current economic crisis in part to this practice. Although really; Not enforcing the Antitrust laws is a practice dating back to day one of the Reagan Adm. and ever since, including Clinton.

We needed to have bigger companies to compete with foreign corporations so that jobs would stay in America. (yeah, that Clinton) The corporate news readers went on to speculate; there was no pretense of it being anything but speculation but it was included in the news anyway; that likely targets of the DOJ were companies like Google and Intel. No mention of the TOO BIG TO FAIL banks that have in fact put all of us straight in the crapper.

Will Obama’s Adm. go after these bloated parasites under the Antitrust laws? Is this why the Stress Tests of the Banks were allowed to come to an ineffectual end? The Stress Tests given to the banks have inspired no confidence among impartial observers who point out that the test didn’t bother to consider the differing nature of each banks loan portfolio or business model. It appears that it was designed to come up with a capital requirement number less than the remaining TARP funds rather than any true assessment of the banks’ conditions.

The test even allows for banks to have a 25 to 1 debt to net capital ratio. This is much like the ratio allowed the Investment Banks (that no longer exist) where any relatively minor crisis will make them run out of cash. Remember that the Investment Banks (that no longer exist) didn’t cash your checks or make your credit cards work at the store. These guys running out of cash is a far more serious matter.

But really the banks are only maintaining the fiction of solvency by not marking to market. If forced to acknowledge the real value of the "toxic assets" now on their books, all of the big banks would have to close their doors. The Government’s test accepted the banks version of what their assets are worth without question. Then there is the commercial real-estate market; the test didn’t allow for significant bank losses in that area even though experts are predicting that we’ve only seen the tip of the iceberg.

So the question remains: what will Obama do about the large banks? If they were treated like the S&L’s of the 80’s a lot of very wealthy Americans would suddenly become middle class when their bonds are declared worthless. People who bought S&L bonds that became worthless were mostly middle class retirees that became destitute. Ever wonder why the very rich invest in low yielding bank bonds rather than the Stock Market like they tell us to do with our Social Security? They expect the Government to bail THEM out. Now that’s REAL SOCIAL SECURITY.