In the Lehmans meltdown or near-meltdown, the US Federal Reserve, bailed out Barclays Bank. This was a well-kept secret at the time. There must have been a deal done with Gordon Brown that the British taxpayer would take on the debts of Northern Rock, RBS and HBOS (to an American ear – all the Scottish-sounding banking groups), while The Fed handled the situation for Barclays. The Fed accepted any level of paper as collateral, but now claims all bail-out investments have since been realised at a profit, as the world of big money has bid up asset prices once more.
In the article below, from the Washington Post, the writer points out that while big business, not only banks, have been bailed, small business and private mortgage-owners have been hung out to dry. It’s as if a superclass has being created, an economy of a few privileged giant corporations, which exist at a level above the real life economy of ordinary people, in which a million $ is a minimum bonus payment, while, at street level, a $1000 gets harder and harder to find.
The papers write of the underclass, but what of the superclass of giant corporations that are all regarded as too big to fail, and who can take any risk they like, in the knowledge that if they get it wrong, they will be bailed out by the world’s central bankers, as they all, on paper, get richer and richer? They flew too close to the sun once, but their wings were refixed. If the wings fall off a second time, I wonder if they’ll manage to do so a second time.
Reality has a nasty habit of refusing to be ignored.
The financial crisis stretched even farther across the economy than many had realized, as new disclosures show the Federal Reserve rushed trillions of dollars in emergency aid not just to Wall Street but also to motorcycle makers, telecom firms and foreign-owned banks in 2008 and 2009.
If only the British and Irish governments’ bail-outs of their banks were able to show a profit so quickly. The Fed seems to have a way of winning the game, and sending markets wherever it wants them to go, getting governments and ordinary people to carry the load while they enrich their chosen select few. If fewer and fewer people are sharing in the festivities, the chances of the system holding up next time it cracks are much thinner. The world will end up with one man holding all the wealth in his hands while the masses are sent to oblivion. He can get newspaper headlines issued saying how rich the world now is, and how good his wealth is for confidence, but no one will care. They will just want their money back, and their lives.