| In any situation, and I do mean any, there are always some people who make money, or find a way to profit, even in desperate times when the mass misery index has to be high. Nowhere is that more evident than right here in the United States. This is where the Bush bailouts, which the incoming President Obama followed through on, in a desperate move to save the system from its own excesses and prevent a killing collapse of the economy (or so every commentator assures us, whether from the right or left), has actually helped the already wealthy become more so. The galling thing is, Wall Street insiders are openly crowing. Read what a highly rated investment newsletter, Taipan Insider for Thursday, 11 March, says (my emphasis is added--- the quote is extensive because it is so very revealing):
"Who says the American economy is in a rough patch? Sure, if you ask the 10% or so of the nation's workers out of a job, you may not hear a grandiose take on the situation. But if you ask the growing number of American millionaires their view of the "Great Recession," they may tell you it's the opportunity they were waiting for.
According to a report this week in The Wall Street Journal, the number of American households with a net worth (not including their primary home) surpassing the million-dollar mark managed to surge by over 15% in 2009. At the same time the Obama administration was pouring hundreds of billions of borrowed dollars into the nation's economy, 7.8 million Americans managed to find a spot in the millionaires' club.
Even more inspiring, the numbers of ultra-high net worth households - $5 million or more in assets - rose by 17%, to hit 980,000.
Who says times are tough?
Is it possible Washington's stimulus efforts had something to do with the sudden surge in wealth? According to my research, it's not only plausible, it's probable.
Just look at Goldman Sachs (GS:NYSE). It's busy these days handling all sorts of government-backed bonds issues, helping Greece hide its debt woes and underwriting the acquisition of huge amounts of capital sourcing.
This week, the bailed-out behemoth is getting attention because of the amount of money it is making as a major underwriter of Washington's Build America Bonds. In yet another example of how government interference creates a wasteful market, Goldman Sachs has been able to charge significantly higher underwriting fees because the bonds are subsidized by you and me, the taxpayer.
In a recent Bloomberg article, Matt Fabian of Municipal Market Advisors wrote, "the large subsidy gives [Goldman] leeway to charge more because the issuer probably cares less about the underwriting fee." In other words, fees don't matter because Uncle Sam's writing the check.
So far, the added fees add up to more than $100 million worth of desperately needed cash that could be used to patch severe local-level budget shortfalls. Instead, it is funneling straight to the wallets of the nation's richest and smartest.
As investors, we really have no reason to complain about the situation. As long as money is trading hands, we have opportunities to jump in and get our fair share's worth. If Goldman is doing it, why can't you?"
The Too Big To Fail banks were hastily bailed out by Bush, Bernancke, and Obama because we had a "liquidity crisis" meaning credit dried up, loans were not being made, and no one trusted anyone, least of all banks trusting each other. Pouring those TARP funds from us taxpayers into the banks was supposed to restore liquidity, and goose the banks into lending again to Main Street. This has not happened. What has happened is that banks have ramped up doing the exact thing that brought on the meltdown in the first place---- using the cheap money from Uncle Sam to engage in risky casino behavior with derivatives, a kind of internal carry trade, if you will.... all the while loudly complaining about Democrats' "out of control spending," and warning about the inevitable collapse of the dollar if a huge new entitlement is passed (i.e., health care).
Hypocrisy? It would seem so. But in the meantime, they are raking in the shekels with abandon; when asked why they are not lending to Main Street, they protest righteously that no one is qualified right now, and no one wants to take out a loan in such an uncertain economy. The famous market, in other words, is just not there.
What is happening, according to reports from non-mass media, is micro-lending. Since the big banks have only contempt for the born losers of Main Street, private lenders and local banks are doing what third world countries have tried: making small loans to local entrepreneurs, performing a function originally undertaken by little savings and loans (until Reagan de-regulated them, when they got delusions of grandeur and tried to emulate big banks, ending up with the Savings and Loan Crisis of the 1980's).
It is, IMO, more and more evident that we must break up big banks and do some heavy re-regulating. We do not want to lose the global clout and expertise of Goldman Sachs, for example, but they absolutely must be reined in. I would point out that global finance is all a game to the practitioners, they even refer to an investment as "a play." We have rules for every game humankind plays. Why not for finance?