September 27, 2011
In this interminable saga of the Great Recession - probably more accurately described as the 21st Century Depression - it has become painfully clear that the unemployment situation is going to persist for a long time to come. It is also now the case that a rather sinister and complicit direct link exists between the giant banks that received enormous amounts of tax payer money and continue to benefit from an extreme amount of liquidity from the Federal Reserve - most of which comes from future tax payer money - and this plague of high unemployment.
Consider the case of Al, a small business owner who faced a dark situation in 2008 and who continues to struggle mostly at the hands of a couple of big banks and the ongoing "unintended consequences" scenario resulting from the extreme preference big banks have gotten aside from everyone else. Al wants to remain anonymous due to his fear of possible reprisals from the very banks he has and continues to struggle with, and so this blog will not in any way or manner reveal his true identity or location.
In 2008 as the downturn really took hold, Al was actually doing just fine. He had savings in reserve for that rainy day, a business that was coming along nicely and was not behind on any payments or credit cards or the like. As the recession really began to clamp down in late 2008 Al was stunned by the summary cancelation of his credit cards, none of which were behind, and the spectacular fall of the stock market which took away most of his rainy day funds. He knew hard times would result from the cancelation of his credit cards as this was surely going to be the case with many other people's credit -and it was. However, at this point there was no sign of the machiavellian moves the banks were taking that would in turn present severe challenges on the path of recovery out of this recession. Al, like most everyone, understood that risk is a part of life and while it was truly sad to see the good times end, no hint of unfair or crooked maneuvers by banks had yet emerged - the recession was at this point just a part of life everyone has to deal with.
Al was shocked when he realized later in 2009 that the enormous bailout funds given banks and the trillions of dollars of liquidity pumped in by the Fed - most of which stayed inside the banking system - would not be coming his or anyone's way. Now faced with the grim prospect of massive unemployment hampering economic activity, no available credit of his own with which to make any moves during the recession to boost his business, and a housing and commercial real estate market so broken that it was now impossible to sell any physical asset he or his business owned and make enough to pay off the loans already against them, there were simply no moves left to make other than firing some of his own people or going bankrupt and thereby probably firing everyone including himself.
The very banks that had been behind the super-risky derivative, CDO and CDS trading schemes, which had then nearly broken the financial system of the country requiring huge amounts of public funds to shore up and then, or so they claimed, to prevent mass unemployment and mass foreclosures and bankruptcies, were going to instead sit on all the piles of liquidity they now had and at the same time stop issuing credit to people, especially small business owners, and also demand that they repay their credit accounts even though the banks had already been funded specifically to enable the relief of bad or dead accounts due to the recession that these very banks had caused!
Perhaps Al's frustration is best demonstrated in the following quote from my interviewing him one Sunday afternoon at our local Starbucks:
"I have now had to fire 1/2 of my people and re-configure how my business works so I can meet the repayment requirements on my canceled credit accounts. It's that or go broke, something has to give. This really aggravates me because the very banks making me do this had a direct hand in the economic fall that wiped out my savings, took away the equity in mine and my business' property, ruined the real estate market in general because of the denial of loans and credit by them, and are now directly responsible for choking off everyone's credit by way of extreme risk aversion despite the fact they were insulated from any real danger by the Fed - unlike any of us! It's like they now own both sides of the equation and are both judge and jury and can even set the trials up. I don't understand why so few realize that the banks' own traders and their own brokerage organizations are actually what caused this super recession. I know two other people who had their lines of credit summarily canceled which ruined their businesses and caused them to instantly fire everyone they had working for them and from then (2009) until now they are still not able to get any new loans or any credit to try and get a business going again because the banks closed their credit off, not because they were behind or defaulting. It's is a complete sucker punch with no referee around to make anyone obey any fairness or fair play rules on a basic level. How is anyone supposed to deal with a situation they did not create, that impacts all areas of the economy and finance at once, is being engineered, it would seem, behind the scenes by those who were directly involved and who now are allowed to control everyone's purse strings and decide who can continue and who has be cut based on their hunch of risk factor, even though these exact same people got that totally wrong in 08? If I didn't know better I'd say the banks are trying to make sure they really will own everything very soon one way or another. Why weren't the people who run these banks the one's who lost their credit rating, their life savings, and their future ability to make money?"
It would seem, according to Al, that the big banks have pulled off the biggest heist ever: getting hold of everyone's property either by literally claiming the title to it in foreclosure or by deliberately engineering the economy to a point where no one is allowed any credit to buy any property unless the bank really, really likes you. And all the while being shielded from any large loss of their own capital by public funds mostly from the very people the banks are now preventing from getting credit.
Add together the millions of examples very much like Al's and the reason for 10% unemployment and something like 19% underemployment continuing for years to come is made clear. The banks have now become feudal class overlords in a economy and country created specifically to get away from financial or economic tyranny. We do not yet seem to have made that great escape.
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