Government of Thieves (Paul Craig Roberts)

  Oct. 17, 2008 (CounterPunch) -- Just as the Bush regime’s wars have been used to pour billions of dollars into the pockets of its military-security donor base, the Paulson bailout looks like a Bush regime scheme to incur $700 billion in new public debt in order to transfer the money into the coffers of its financial donor base. The US taxpayers will be left with the interest payments in perpetuity (or inflation if the Fed monetizes the debt), and the number of Wall Street billionaires will grow. As for the U.S. and European governments’ purchases of bank shares, that is just a cover for funneling public money into private hands.

  The explanations that have been given for the crisis and its bailout are opaque. The U.S. Treasury estimates that as few as 7% of the mortgages are bad. Why then do the United States, UK, Germany, and France need to pour more than $2.1 trillion of public money into private financial institutions?

  If, as the government tells us, the crisis stems from subprime mortgage defaults reducing the interest payments to the holders of mortgage backed securities, thus driving down their values and threatening the solvency of the institutions that hold them, why isn’t the bailout money used to address the problem at its source? If the bailout money was used to refinance troubled mortgages and to pay off foreclosed mortgages, the mortgage backed securities would be made whole, and it would be unnecessary to pour huge sums of public money into banks. Instead, the bailout money is being used to inject capital into financial institutions and to purchase from them troubled financial instruments.

  It is a strange solution that does not address the problem. As the U.S. economy sinks deeper into recession, the mortgage defaults will rise. Thus, the problem will intensify, necessitating the purchase of yet more troubled instruments.

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