The Nation: Portrait of a Panic

Portrait of a Panic
Howl
By Nicholas von Hoffman

July 15, 2008



For the past two days, America has been shaken by photos and video reports of angry customers lined up to withdraw their money from branch offices of the failed IndyMac bank. Such images would not have been seen during America's last great financial disaster.

Comb the microfilm records of newspapers in 1931 and 1932, when depositor panics closed most of the banks in the United States, and you will not find a picture of terrified depositors lining up in hopes of extricating their life savings. Their absence stemmed from editors' fear that the publicity would intensify the panic. Today, editors exercise no such restraint--and with the Internet, who needs editors?

Media images of panicked Americans may have depressed Federal Reserve Chairman Ben Bernanke. But more depressing, after his repeated efforts, including the throat-slitting of Bear Stearns, must be knowing that he has failed.

Stockholders in banks and kindred financial institutions are in such a panic state, they cannot get rid of their investments fast enough. But as they dump their holdings, the price tanks faster than they sell. In the space of a year, Citigroup, once considered America's largest bank and now the world's largest mess, has seen the price of a share of its stock fall from almost $53 to less than $14. Most of that happened before Treasury Secretary Henry Paulson popped up in front of a replica of the Liberty Bell on a Sunday afternoon to announce his plan to save, bolster, prop up, rescue, bail out or pick-your-verb Fannie Mae and Freddie Mac.

In the years before Paulson's plan, Bernanke had moved hell and high water to stop the implacable slide of real estate prices, but he has not been able to do it. He loaned money, he pumped money, he swapped money for unsellable bonds. In every imaginable way he forced money into the imploding system, and to no avail; the price of real estate keeps dropping. ......(more)

The complete piece is at: http://www.thenation.com/doc/20080721/howl2

How true.

Bush says it's perfectly fine. Bernanke says HOLY SHIT. The only praying going on is that they can continue the charade that the market/economy is ok until Bush leaves office. After the election, the repukes will give Obama a depression then run against him since "he (obama)" broke the economy. Repukes will then remain in office for the next 12-16 years.

It seems so unstable and so much of it is based on mass emotion, and I have never seen anything in the history of humans to make me think that trusting my money to the emotional whims of large human groups is a good idea.

:applause: Screams from the "Amen!" corner.

I wasn't really all that worried before that.

Don

You can pump as much hot air into the canopy as you want, but until you mend the huge rip in the fabric, nothing is going to happen. So when Bernanke was feverishly throwing a lot of money at the real estate market, he was doing nothing to rein in the ruinous practices that were causing the problems in the first place. The good news for some of the latter day robber barons is that Bernanke's stalling actions gave a few of them a little precious time to get out of the market if they could, and cut their own losses.

For the rest of us? How good do you feel about working your ass off for the next three or five years to pay for this lavish party that you weren't invited to?

But I think when people are really starting to worry, they start looking for the reason things changed. They start reading and thinking and analyzing. Let's hope they wind up here.

One poll said that 90% of americans now think B* is less trustworthy than Nixon. Ok, that last 10% just don't think, so, write them off.

This means 90% of us are finally looking at our government. Unfortunately, it takes a disaster before people wake up and take responsibility for their representative government.

The funny thing is, alot of americans have always felt that in times of fiscal trouble, look to the GOP.

Not any more. The GOP created this trouble.

So, people are really going to have to think locally and start deciding for themselves.