In case you were wondering where those record financial industry profits are coming from:
Increased housing commitments swelled U.S. taxpayers’ total support for the financial system by $700 billion in the past year to around $3.7 trillion, a government watchdog said on Wednesday. The Special Inspector General for the Troubled Asset Relief Program said the increase was due largely to the government’s pledges to supply capital to Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) and to guarantee more mortgages to the support the housing market.
It’s a brilliant business plan.
1) Gamble billions of dollars. If you win, gamble more. If you lose, go to step 2.
2) Ask the government to pay you trillions of dollars to prevent you from going bankrupt. Otherwise cats and dogs will start living together! Tanks on the streets!
3) Profit!
PS – Don’t forget to pay yourself millions of dollars in bonuses for your incredible and irreplaceable business acumen.
This is nothing less than financial rape by politics. It amounts to locking up one-quarter of the economy to guarantee the continued operation of the financial sector, which somehow can’t survive on only one-third of all American profits.
If you want to understand how America threw away its post-WWII economic advantage over the rest of the world, just look at that chart. And notice how the fall in financial profits corresponded with the nation’s climb out of the 1970s economic malaise. Profits are the economy’s lifesblood, but diverting those profits to the financial sector has the same effect as a vampire draining the blood out of a human body. When the historians of the future write the history of America’s decline and fall, you can be sure that the Congress-assisted TARP rape will be marked as a significant event in that process.