Warehouse G

Tax Dollars To Crooks


Why Isn’t Public Benefiting From Swell Of Cheap Federal Money?

By James Donahue

While we admit that we don’t have a full understanding of all that “high finance” going on at federal levels, we have a strange feeling that American taxpayers are getting swindled by a lot of elected and appointed crooks in high places.

First our legislators got pushed by Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson into dumping nearly a trillion dollars into the coffers of major U.S. banks under threat of a global financial crash.

Next we find out that in their haste to fix what was described as an international crisis, our “leaders” didn’t bother to include a plan for supervising the distribution of that money or controlling how it was used. Consequently we are hearing horror stories of big banks buying other banks, and high-paid executives taking home ultra-million dollar bonuses. But the money is not trickling down to business interests, farmers and the public to help buy the goods and services that are key to their daily operations.

This week the Federal Open Market Committee held an emergency meeting and decided to drop interest rates on federal loans to banks from 1 percent to a record low of zero to 0.25 percent. So in addition to getting a massive “bailout” of federal tax dollars, banks are now able to borrow money from other banks at extremely low, or no interest whatsoever.

The committee issued a statement that explained the reduction was “to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve’s balance sheet at a high level.” If you are like this writer, the statement leaves us all somewhat befuddled.

In on-line commentary to this latest news, one reader offered the following insite:

How is it acceptable that banks can borrow at such low rates, yet such rates never transfer to the consumer?” the writer asked. “How is it that the Fed has been lending at 1.5 percent for a few months, and yet I have just gotten notification from three credit cards that my rates have been adjusted up?”

The writer noted that the credit card rate increase was not a penalty because of delinquent payments, “but to hedge their bet, or possibly to drive me further into debt.”

We have noticed that the blame for all of this economic woe has fallen on the mortgage lending institutions that carelessly goaded low income families into accepting balloon-styled mortgage loans that opened with low interest rates but then moved to very high rates after the first year or two. The crunch hit at about the time many of these people were losing their jobs or were taking pay cuts. They couldn't keep up with the higher house payments and consequently lost their homes.

According to a new report on the television news documentary 60-Minutes, a second wave of the mortgage bloodbath is about to hit us.

We suggested at the time this crisis began that the logical solution would have been to use the bailout money to provide government-backed low or even no interest loans to the mortgage holders so they can keep their homes, make their payments, and in this way keep the banks and mortgage holders solvent.

The money also could be available to new home buyers interested in buying some of the thousands of empty bank-owned houses now peppering just about every town in the nation.

The other logical thing would be to support President-Elect Barack Obama’s plan to raise the minimum wage, build up the strength of organized labor, give tax incentives to encourage new industrial growth in America to create new and better paying jobs, and in this way give workers the means to keep up with the rising cost of buying homes, cars, food and all the other things that meet our daily needs.

We think it is still a good idea, although a lot of tax money has already slipped through the cracks. There isn't much left now to help anybody.

Using tax dollars to make the fat cats on Wall Street and in Washington even richer than they already are is not a solution to anything. But that is what has been going on. And they are blatantly doing it right before our eyes.