The W.C. Varones Blog has not often had anything positive to say about Sheila Bair. Not when she looted the FDIC insurance fund to bail out the wealthy, uninsured depositors of IndyMac. Nor when she wasted FDIC funds hiring celebrity huckster Suze Orman to pimp bank deposits.
Frankly, we never saw why so many on the Zero Hedge – Naked Capitalism – Jr. Deputy Accountant – Matt Taibbi anti-bankster front seemed to view Sheila Bair so positively.
But in retirement, Sheila Bair just found redemption by writing an epic column for the ages, exposing for the masses Ben Bernanke’s ZIRP as a looting of the middle class to bail out the banksters.
For several years now, the Fed has been making money available to the financial sector at near-zero interest rates. Big banks and hedge funds, among others, have taken this cheap money and invested it in securities with high yields. This type of profit-making, called the “carry trade,” has been enormously profitable for them.
So why not let everyone participate?
Under my plan, each American household could borrow $10 million from the Fed at zero interest. The more conservative among us can take that money and buy 10-year Treasury bonds. At the current 2 percent annual interest rate, we can pocket a nice $200,000 a year to live on. The more adventuresome can buy 10-year Greek debt at 21 percent, for an annual income of $2.1 million. Or if Greece is a little too risky for you, go with Portugal, at about 12 percent, or $1.2 million dollars a year. (No sense in getting greedy.)
Think of what we can do with all that money. We can pay off our underwater mortgages and replenish our retirement accounts without spending one day schlepping into the office. With a few quick keystrokes, we’ll be golden for the next 10 years.
Bair is exactly right. Wall Street fatcats blew up the financial system and crashed the economy. Now the Federal Reserve is bailing them out by giving them 0% loans at the expense of widows and orphans earning 0% on their dwindling savings.
HT: Our good host, H.M. Stuart
Bair and Born both warned about the problems in the derivatives markets. As to the substance of her article, I largely agree. The banksters pretty much own the system.
Steve
Thanks Steve. Also, saw your comment on my earlier debt post. I wanted to follow up to get your thoughts.
WWII debt took both a balanced budget (even slight temporary surplus) and significant inflation to get out of. Given that neither party is proposing anything close to a balanced budget, don’t you think inflation is the likeliest way out?
The FEd has a dual mandate, but it has always erred on the side of maintaining a targeted inflation rate since the 80s. I think our debt issue is really our long term health care costs issue. It is not something we can inflate out of. Might they try it? Maybe, but I am not good at predicting things like that. I think institutions have memories and tend to do what they have done in the past.
My guess is that we wont really see a serious approach to debt until the bond market forces it.
Steve
“The banksters pretty much own the system.” (Steve)
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The government isn’t bailing out independent businessmen (bankers, car-makers, airlines, etc) it’s bailing out partners.
I believe G W Bush’s 2 largest contributors (allies) were R J Reynolds and Exxon-Mobil, while Barack Obama’s are BP-Amocco and Goldman Sachs. There are scores of different junior partners on both sides, but BOTH major Parties are “Corporatist” entities….both are devoted to the partnership between business and government.
You COULD argue as many politicians do, that that seems to be “what most people want.”