Rolling Stone Matt Tiabbi reviewed the shadow budget of the United States back in April, 2011 This was a description of some of the $7.7 trillion given out at 0.1 to 0.25% interest. Banks and other well connected people reaped an estimated $13 billion of income by taking advantage of the Fed’s below-market rates.
A huge roaring river of cash flowing out of the Federal Reserve to destinations neither chosen by the president nor reviewed by Congress, but instead handed out by fiat by unelected Fed officials using a seemingly nonsensical and apparently unknowable methodology.
The Fed sent billions in bailout aid to banks in places like Mexico, Bahrain and Bavaria, billions more to a spate of Japanese car companies, more than $2 trillion in loans each to Citigroup and Morgan Stanley, and billions more to a string of lesser millionaires and billionaires with Cayman Islands addresses.
The Federal Reserve handed them both low-interest loans of nearly a quarter of a billion dollars through a complicated bailout program that virtually guaranteed them millions in risk-free income to two wives of powerful people. Christy is the wife of John Mack, the chairman of Morgan Stanley. Susan is the widow of Peter Karches, a close friend of the Macks who served as president of Morgan Stanley’s investment-banking division. Neither woman appears to have any serious history in business, apart from a few philanthropic experiences.
The technical name of the program that Mack and Karches took advantage of is TALF, short for Term Asset-Backed Securities Loan Facility. But the federal aid they received actually falls under a broader category of bailout initiatives, designed and perfected by Federal Reserve chief Ben Bernanke and Treasury Secretary Timothy Geithner, called “giving already stinking rich people gobs of money for no fucking reason at all.”
Created just after Barack Obama’s election in November 2008, the program’s ostensible justification was to spur more consumer lending, which had dried up in the midst of the financial crisis. But instead of lending directly to car buyers and credit-card holders and students — that would have been socialism! — the Fed handed out a trillion dollars to banks and hedge funds, almost interest-free. In other words, the government lent taxpayer money to the same assholes who caused the crisis, so that they could then lend that money back out on the market virtually risk-free, at an enormous profit.
A key aspect of TALF is that the Fed doles out the money through what are known as non-recourse loans. Essentially, this means that if you don’t pay the Fed back, it’s no big deal. The mechanism works like this: Hedge Fund Goon borrows, say, $100 million from the Fed to buy crappy loans, which are then transferred to the Fed as collateral. If Hedge Fund Goon decides not to repay that $100 million, the Fed simply keeps its pile of crappy securities and calls everything even.
The US is ranked 24th at 7.1. Canada is 10th at 8.7.
Despite the European crisis and increasing obviousness of US corruption, China and India are perceived as two of the more corrupt nations in the world, according to an index released last week by Transparency International (TI).
The Berlin-based group scored 183 countries on a scale of 0 to 10, with 0 being highly corrupt and 10 being very clean.
China came in at 75th with a score of 3.6 on the 10-point scale, 0.1 better than last year’s evaluation. By comparison, North Korea and Somalia tied with scores of 1.0 to bring up the bottom of the list.
Meanwhile, India has been placed below China in the TI report yet again, dropping from 87th in 2010 to 95th in this year’s rankings with a score of 3.1.
This drop may have been brought on by a slew of mass demonstrations against corruption held across India this year.
Why do people defend corrupt systems ?
Reviewing laboratory and cross-national studies, the paper illuminates four situations that foster system justification: system threat, system dependence, system inescapability, and low personal control.
When we’re threatened we defend ourselves—and our systems. Before 9/11, for instance, President George W. Bush was sinking in the polls. But as soon as the planes hit the World Trade Center, the president’s approval ratings soared. So did support for Congress and the police. During Hurricane Katrina, America witnessed FEMA’s spectacular failure to rescue the hurricane’s victims. Yet many people blamed those victims for their fate rather than admitting the agency flunked and supporting ideas for fixing it. In times of crisis, say the authors, we want to believe the system works.
We also defend systems we rely on. In one experiment, students made to feel dependent on their university defended a school funding policy—but disapproved of the same policy if it came from the government, which they didn’t perceive as affecting them closely. However, if they felt dependent on the government, they liked the policy originating from it, but not from the school.
When we feel we can’t escape a system, we adapt. That includes feeling okay about things we might otherwise consider undesirable. The authors note one study in which participants were told that men’s salaries in their country are 20% higher than women’s. Rather than implicate an unfair system, those who felt they couldn’t emigrate chalked up the wage gap to innate differences between the sexes. “You’d think that when people are stuck with a system, they’d want to change it more,” says Kay. But in fact, the more stuck they are, the more likely are they to explain away its shortcomings. Finally, a related phenomenon: The less control people feel over their own lives, the more they endorse systems and leaders that offer a sense of order.
The research on system justification can enlighten those who are frustrated when people don’t rise up in what would seem their own best interests. Says Kay: “If you want to understand how to get social change to happen, you need to understand the conditions that make people resist change and what makes them open to acknowledging that change might be a necessity.”