Why my choice isn't a choice, inter alia (warning: political)

[annarborgator]

In an unusually frank article published in Saturday's New York Times, the newspaper's economic columnist, Joe Nocera, reveals what he calls "the dirty little secret of the banking industry"--namely, that "it has no intention of using the [government bailout] money to make new loans."

As Nocera explains, the plan announced October 13 by Treasury Secretary Henry Paulson to hand over $250 billion in taxpayer money to the biggest banks, in exchange for non-voting stock, was never really intended to get them to resume lending to businesses and consumers--the ostensible purpose of the bailout. Its essential aim was to engineer a rapid consolidation of the American banking system by subsidizing a wave of takeovers of smaller financial firms by the most powerful banks.

Nocera cites an employee-only conference call held October 17 by a top executive of JPMorgan Chase, the beneficiary of $25 billion in public funds. Nocera explains that he obtained the call-in number and was able to listen to a recording of the proceedings, unbeknownst to the executive, whom he declines to name.

Asked by one of the participants whether the $25 billion in federal funding will "change our strategic lending policy," the executive replies: "What we do think, it will help us to be a little bit more active on the acquisition side or opportunistic side for some banks who are still struggling."

Referring to JPMorgan's recent government-backed acquisition of two large competitors, the executive continues: "And I would not assume that we are done on the acquisition side just because of the Washington Mutual and Bear Stearns mergers. I think there are going to be some great opportunities for us to grow in this environment, and I think we have an opportunity to use that $25 billion in that way, and obviously depending on whether recession turns into depression or what happens in the future, you know, we have that as a backstop."

As Nocera notes: "Read that answer as many times as you want--you are not going to find a single word in there about making loans to help the American economy."

Later in the conference call the same executive states, "We would think that loan volume will continue to go down as we continue to tighten credit to fully reflect the high cost of pricing on the loan side."

"It is starting to appear," the Times columnist writes, "as if one of the Treasury's key rationales for the recapitalization program--namely, that it will cause banks to start lending again--is a fig leaf.... In fact, Treasury wants banks to acquire each other and is using its power to inject capital to force a new and wrenching round of bank consolidation."

Early this month, he explains, "in a nearly unnoticed move," Paulson, the former CEO of Goldman Sachs, put in place a new tax break worth billions of dollars that is designed to encourage bank mergers. It allows the acquiring bank to immediately deduct any losses on the books of the acquired bank.

Paulson and other Treasury officials have made public statements calling on the banks that receive public funds to use them to increase their lending activities. That, however, is for public consumption. The bailout program imposes no lending requirements on the banks in return for government cash.
Already, the credit crisis has been used to engineer the takeover of Bear Stearns and Washington Mutual by JPMorgan, Merrill Lynch by Bank of America, Wachovia by Wells Fargo and, last Friday, National City by PNC.

What the Wall Street Journal on Saturday called the "strong-arm sale" of National City provides a taste of what is to come. The Treasury Department sealed the fate of the Cleveland-based bank by deciding not to include it among the regional banks that will receive government handouts. It then gave Pittsburgh-based PNC $7.7 billion from the bailout fund to help defray the costs of a takeover of National City. PNC will also benefit greatly from the tax write-off on mergers enacted by Treasury.

All of the claims that were made to justify the bank bailout have been exposed as lies. President Bush, Federal Reserve Chairman Ben Bernanke and Paulson were joined by the Democratic congressional leadership and Barack Obama in warning that the bailout had to be passed, and passed immediately, despite massive popular opposition. Those who opposed the plan were denounced for jeopardizing the well being of the American people.

In a nationally televised speech delivered September 24, in advance of the congressional vote on the bailout plan, Bush said it would "help American consumers and businessmen get credit to meet their daily needs and create jobs." If the bailout was not passed, he warned, "More banks could fail, including some in your community. The stock market would drop even more, which would reduce the value of your retirement account.... More businesses would close their doors, and millions of Americans could lose their jobs ... ultimately, our country could experience a long and painful recession."

One month later, the bailout has been enacted, and all of the dire developments--banks and businesses disappearing, the stock market plunging, unemployment skyrocketing--which the American people were told it would prevent are unfolding with accelerating speed.

While Obama talks about the need for all Americans to "come together" in a spirit of "shared sacrifice"--meaning drastic cuts in Medicare, Medicaid, Social Security and other social programs--and the cost of the bailout is cited to justify fiscal austerity, the bankers proceed to ruthlessly prosecute their class interests.
As the World Socialist Web Site warned when it was first proposed in mid-September, the "economic rescue" plan has been revealed to be a scheme to plunder society for the benefit of the financial aristocracy. The American ruling elite, utilizing its domination of the state and the two-party political system, is exploiting a crisis of its own making to carry through an economic agenda, long in preparation, that could not be imposed under normal conditions.

The result will be greater economic hardship for ordinary Americans. The big banks will have even greater market power to set interest rates and control access to credit for workers, students and small businesses.

While no serious measures are being proposed, either by the Bush administration, the Republican presidential candidate or his Democratic opponent, to prevent a social catastrophe from overtaking working people, the government is organizing a restructuring of the financial system that will enable a handful of mega-banks to increase their power over society.

They both intend to continue the same structure of power. Therefore they are both worthless to me as a free thinking individual.

THIS is why it's generally a waste of my fucking time. But I will not give up, for I cannot.

[radbag]

it's their money to do with what they please...did you think the gov't had guidelines as to how it was to be used?

at the end of the day, the money is being used for something...not horded.

and who's to say that we didn't have too many banks to begin with

and would you rather a foreign entity (deutsche bank, bank of tokyo, kuwaiti investment authority) buy our american banks? where's your nationalism?

i've been on conference calls like that anyway...top level management don't divulge their strategies on open lines...they divulge it when it's done....my guess is that mr. nocera was listening to someone who thinks he's a somebody but in fact is a nobody.

[radbag]

furthermore - these conference calls are set up as 'sis-boom-bah' type rallys to try and raise the morale of the employee...wall street morale is at an all time low...compensation conversations are occuring right now and people are being made aware of the lack of money to pay these people the salaries they thought they were getting....so a rally cry speech is an often used technique this time of year to try and keep your talent and at the same time, convey the harsh reality of the compensation season to them.

[radbag]

"It is starting to appear," the Times columnist writes, "as if one of the Treasury's key rationales for the recapitalization program--namely, that it will cause banks to start lending again--is a fig leaf.... In fact, Treasury wants banks to acquire each other and is using its power to inject capital to force a new and wrenching round of bank consolidation."

pure speculation but conceivable.

[radbag]

Early this month, he explains, "in a nearly unnoticed move," Paulson, the former CEO of Goldman Sachs, put in place a new tax break worth billions of dollars that is designed to encourage bank mergers. It allows the acquiring bank to immediately deduct any losses on the books of the acquired bank.

maybe so but the price has to be right and what's wrong anyways with strengthening our companies against their global competitors?

[radbag]

Paulson and other Treasury officials have made public statements calling on the banks that receive public funds to use them to increase their lending activities. That, however, is for public consumption. The bailout program imposes no lending requirements on the banks in return for government cash.
Already, the credit crisis has been used to engineer the takeover of Bear Stearns and Washington Mutual by JPMorgan, Merrill Lynch by Bank of America, Wachovia by Wells Fargo and, last Friday, National City by PNC.

What the Wall Street Journal on Saturday called the "strong-arm sale" of National City provides a taste of what is to come. The Treasury Department sealed the fate of the Cleveland-based bank by deciding not to include it among the regional banks that will receive government handouts. It then gave Pittsburgh-based PNC $7.7 billion from the bailout fund to help defray the costs of a takeover of National City. PNC will also benefit greatly from the tax write-off on mergers enacted by Treasury.

failed to mention that both nat city and wachovia and wamu were on the brink of failure...bear and merrill had so much subprime shit on the books that those companies were deemed worthless....these companies had no choice...the alternative would have been catastrophic if they were to be left to die out on the vine.

[annarborgator]

Because there's massive moral hazard involved with beauracrats deciding which company gets a check cut and which one is left hanging. The market should decide not the fucking government. And if they don't have the money to merge, then they shouldn't merge--they shouldn't need the people's money....if they are supposed to get something done then that means they have the money for it...oh no wait...it's all fake money anyway...it's just a pyramid scheme built on the false premise that money earns interest over time.

The practical effects....best explained by David Walker...I'm about to post you up an article...it's the thing that nobody talks about because it's the elephant in the room and both candidates are candyass bitches for making up other BS to talk about

[annarborgator]

Staring into the abyss always focuses the mind, which can help you avoid falling in. So let's take a look at the potential catastrophe that awaits us once we survive our current crisis.

At the dawn of the 21st century the U.S. had $5.7 trillion in total debt. As we approach the end of George W. Bush's presidency only eight years later, that sum has nearly doubled, thanks to war costs, tax cuts, spending increases, expanded entitlement programs, and now a welter of government bailouts and rescues.

This year was particularly bad. The federal budget deficit for fiscal 2008 hit $455 billion, up from $162 billion last year. That figure does not include the cost of the Emergency Economic Stabilization Act of 2008, which has an initial pricetag in the hundreds of billions of dollars. In fairness, some of that money presumably will come back to the Treasury, since the new rescue-related sums will be used to acquire preferred stock, mortgages, and other assets that someday could be sold at a profit.

Yet any such calculations are penny ante compared with the fiscal disaster that is bearing down on America. It's no longer an event in the misty future. It officially began earlier this year when teacher Kathleen Casey-Kirschling of Maryland became the first baby-boom retiree to collect Social Security benefits. She will be followed by about 78 million more boomers over the next 17 years.

The entitlements due from Social Security and Medicare present us with that frightening abyss. The costs of these current programs, along with other health-care costs, could bankrupt our country. The abyss offers no assets, troubled or otherwise, to help us cross it.

Yes, some have suggested less-than-revolutionary measures that could help. Among them: budget savings that would accrue from repealing the Bush-era tax cuts, ending the Iraq war, or expanding the economy after the current downturn runs its course. But even if the economy were to grow at the level of 3.2% a year, as it did in the 1990s, and these other savings were achieved, they wouldn't come close to addressing our federal financial problem.

Nor can we be complacent about timing. The costs of these programs start to threaten our solvency in the next several years. The only way to get across the chasm is to begin making tough choices now to change our current course. Delay will make the problem worse.

In fact, the deteriorating financial condition of our federal government in the face of skyrocketing health-care costs and the baby-boom retirement could fairly be described as a super-subprime crisis. It would certainly dwarf what we're seeing now.

The U.S. Government Accountability Office (GAO), noting that the federal balance sheet does not reflect the government's huge unfunded promises in our nation's social-insurance programs, estimated last year that the unfunded obligations for Medicare and Social Security alone totaled almost $41 trillion. That sum, equivalent to $352,000 per U.S. household, is the present-value shortfall between the growing cost of entitlements and the dedicated revenues intended to pay for them over the next 75 years.

Why call it a super-subprime crisis? Besides its gigantic scale, there are very disturbing similarities between the current mortgage-related crisis and our next potential disaster.

First, like the securitized investment vehicles that blew up, federal programs were launched without adequately thinking through who would bear the ultimate cost and related risk. Just as originators of mortgages let themselves off the hook by unloading packages of dubious loans onto others, lawmakers have increased spending, expanded entitlement programs, and cut taxes while expecting future generations to pay the bill.

Second, just as a lack of transparency associated with mortgage-backed securities resulted in big surprises and large losses for investors, our nation's huge off-balance-sheet obligations for Social Security and Medicare present a threat wrapped in camouflage. After all, the government's "trust funds" don't really provide much security since they don't hold anything but more government debt.

Third, in the same way that private sector "risk management" executives failed to prevent the subprime mortgage crisis, overseers in Congress and the executive branch have turned a blind eye to costs associated with entitlement programs and tax cuts. While lax regulation of banks fed the current subprime crisis, a lack of statutory budget controls has led to a widening gap between the government's revenues and costs.

At the heart of these problems is our leaders' collective failure to act in the face of known challenges. Our country has veered from its founding principles, which held to individual responsibility and accountability today in order to create more opportunity tomorrow. When our constitution was written, the concepts of thrift and prudence were no less at the center of the American spirit than liberty and justice.

During past financial crises and wars, the government went into debt because our nation's survival was at stake. What has changed is that piling up debt has become business as usual, even during times of prosperity.

Today we are headed toward debt levels that far exceed the all-time record as a percentage of our economy. In fact, by 2040 we are projected to see debt as a percentage of our economy that is double the record set at the end of World War II. Based on GAO data, balancing the budget in 2040 could require us to cut federal spending by 60% or raise overall federal tax burdens to twice today's levels.

Medicare, Medicaid, and Social Security already account for more than 40% of the total federal budget. And their portion of the budget is expected to grow so fast that their cost, and the cost of servicing our debt, will soon crowd out vital programs, including research and development, critical infrastructure, education, and even national defense.

The crisis we face is one of numbers and demographics but also of attitudes. Promises were made in an earlier time, when they seemed more affordable. Like homeowners borrowing against the value of their homes in the expectation that the values would go up forever, the American government borrowed against the future and assumed that the economy would grow fast enough to make that debt affordable.

But our national debt is not limitless, and our foreign lenders are not fools. If we persist on our current "do nothing" path, our future will be jeopardized. Americans need to reconcile the government we want with the taxes we're willing to pay for it.

True, attempts at reforming Medicare and Social Security have foundered in the past, and there may be some Americans who think that if the government can bail out the financial sector, it can bail out our entitlement programs. But the political difficulty of tackling these problems, hard as they are, has to be overcome this time.

The next President, working on a bipartisan basis with the Congress, must make sure that tough controls are put in place to get control of the budget, once economic conditions improve. (Example: We can require that all new spending programs, commitments, and tax cuts are paid for by comparable spending cuts or revenue increases in other parts of the budget.)

We'll need to make some tough decisions on which of the Bush tax cuts we can afford to keep, and resolve what to do about the alternative minimum tax.

These problems are not beyond our ability to master them. Social Security can be made sustainable and secure with some modest changes over time in retirement benefits, the retirement age, and the tax structure, as Republicans and Democrats did in the early 1980s.

As for Medicare, there are a number of good ideas that would introduce more cost sharing for the wealthy, increased competition, better cost controls, more use of technology, and other steps to curb the growth of health-care spending.

I urge the government to set up a bipartisan commission that would begin working in early 2009. It should keep everything on the table - all entitlements, other spending, and tax programs - and make recommendations on both sides of the federal ledger.

If we bring together the talent and expertise that abound in our great country, we can see our way through the current financial crisis and find solutions for the next one. From Washington we'll need leadership rather than laggardship. The 78 million baby-boomers aren't getting any younger.

http://money.cnn.com/2008/10/28/magazines/fortune/babyboomcrisis_walker.fortune/index.htm

[radbag]

One month later, the bailout has been enacted, and all of the dire developments--banks and businesses disappearing, the stock market plunging, unemployment skyrocketing--which the American people were told it would prevent are unfolding with accelerating speed.

panic selling has nothing to do with it?

an election looming and uncertainty concerning the country's debt and receivables are up in the air has nothing to do with it?

global recession has nothing to do with it?

recent quarterly resets on adjustable rate mortgages resulting in more mortgage defaults has nothing to do with it?



commercial paper program (short term borrowing between banks and financial institutions) is starting to see activity pick up....activity that has not been seen in the last 8 weeks

LIBOR (london interbank offering rate) spreads are starting to normalize...still at lofty spreads but are coming off their highs


these 2 indicators alone tell me that the market is reacting well to these cash infusions.

[radbag]

Because there's massive moral hazard involved with beauracrats deciding which company gets a check cut and which one is left hanging. The market should decide not the fucking government. And if they don't have the money to merge, then they shouldn't merge--they shouldn't need the people's money....if they are supposed to get something done then that means they have the money for it...oh no wait...it's all fake money anyway...it's just a pyramid scheme built on the false premise that money earns interest over time.

The practical effects....best explained by David Walker...I'm about to post you up an article...it's the thing that nobody talks about because it's the elephant in the room and both candidates are candyass bitches for making up other BS to talk about

WAIT!!! i'm still dissecting the nocera article! lol

[annarborgator]

it's their money to do with what they please...did you think the gov't had guidelines as to how it was to be used?

LMAO. No I knew they had no guidelines--why do you think I opposed the bullshit bailout? I knew the banksters would "take the money and run".

at the end of the day, the money is being used for something...not horded.

You mean, to like shore up their balance sheets enough to make all the mergers possible that need to happen but nobody has the money for? And why wasn't it just explained that way? Is it because they're all liars?

and who's to say that we didn't have too many banks to begin with

How many banks exist? That's how many we need to get rid of.

and would you rather a foreign entity (deutsche bank, bank of tokyo, kuwaiti investment authority) buy our american banks? where's your nationalism?

Hell no. I also don't think we should be lending tons of money to other governments to prop them up. But we do it. What's the diff? Short answer: nothing.

i've been on conference calls like that anyway...top level management don't divulge their strategies on open lines...they divulge it when it's done....my guess is that mr. nocera was listening to someone who thinks he's a somebody but in fact is a nobody.

Still hard to argue with the substance of a couple of the quotes. I realize you are sticking up for your industry and I probably am totally ignorant. Just don't get why they have so much fake power.

[annarborgator]

WAIT!!! i'm still dissecting the nocera article! lol

I'm dissecting your dissection :afro:

[annarborgator]

Early this month, he explains, "in a nearly unnoticed move," Paulson, the former CEO of Goldman Sachs, put in place a new tax break worth billions of dollars that is designed to encourage bank mergers. It allows the acquiring bank to immediately deduct any losses on the books of the acquired bank.

maybe so but the price has to be right and what's wrong anyways with strengthening our companies against their global competitors?

Let's be honest, the issue with this is the transparency involved...we constantly move the target on folks...we love changing the rules when it suits us...that's bad business...wholly short-sighted...pure evil in my book.

[radbag]

The result will be greater economic hardship for ordinary Americans. The big banks will have even greater market power to set interest rates and control access to credit for workers, students and small businesses.

While no serious measures are being proposed, either by the Bush administration, the Republican presidential candidate or his Democratic opponent, to prevent a social catastrophe from overtaking working people, the government is organizing a restructuring of the financial system that will enable a handful of mega-banks to increase their power over society.

maybe so.

based on this, we should be buying citigroup stock no?

[annarborgator]

LOL @ buying Citigroup....totally agree

[radbag]

it's their money to do with what they please...did you think the gov't had guidelines as to how it was to be used?

LMAO. No I knew they had no guidelines--why do you think I opposed the bullshit bailout? I knew the banksters would "take the money and run".

at the end of the day, the money is being used for something...not horded.

You mean, to like shore up their balance sheets enough to make all the mergers possible that need to happen but nobody has the money for? And why wasn't it just explained that way? Is it because they're all liars?

and who's to say that we didn't have too many banks to begin with

How many banks exist? That's how many we need to get rid of.

and would you rather a foreign entity (deutsche bank, bank of tokyo, kuwaiti investment authority) buy our american banks? where's your nationalism?

Hell no. I also don't think we should be lending tons of money to other governments to prop them up. But we do it. What's the diff? Short answer: nothing.

i've been on conference calls like that anyway...top level management don't divulge their strategies on open lines...they divulge it when it's done....my guess is that mr. nocera was listening to someone who thinks he's a somebody but in fact is a nobody.

Still hard to argue with the substance of a couple of the quotes. I realize you are sticking up for your industry and I probably am totally ignorant. Just don't get why they have so much fake power.

point 1 - i opposed the bailout too and when they voted against it the first time (thanks nancy pelosi), i was 'in the closet' happy...happy because i believed the market had immense prosperity and what we're experiencing now is a massive hangover...the only way to feel better is to throw the fuck up...sure, having the 'hair of the dog' helps but it's a band-aid covering up a larger issue...YOU DRINK TOO MUCH. meh...they passed it and i was like, oh well...gov't stepping in cause of the morality issue...that in itself to me was the moral hazard issue they had responded to

point 2 - you're basing your conclusion on hearsay and a reporters opinion...conceivable but still an opinion...no one's lying about what they need the money for.....AT THAT PLACE AND TIME THAT IS....markets change in a minute...what was the priority yesterday could change tomorrow...it's being nimble...being flexible...that's what executives are paid to do....paid to change course, have the conviction to do it and obtain the means and support if the current market condition calls for it

point 3 - we need banks....otherwise, uncle rocco and vito take over

point 4 - agreed....but as it stands, can our best american bank compete with the middle east most powerful financial entity? chinas? japans? the answer is NO sadly...imagine if our biggest bank was bought by any of the aforementioned...think about that.

point 5 - i had a good post re: late year conference calls trying to boost moral...please refer to that AA.

thanks for indulging me.

[radbag]

Early this month, he explains, "in a nearly unnoticed move," Paulson, the former CEO of Goldman Sachs, put in place a new tax break worth billions of dollars that is designed to encourage bank mergers. It allows the acquiring bank to immediately deduct any losses on the books of the acquired bank.

maybe so but the price has to be right and what's wrong anyways with strengthening our companies against their global competitors?

Let's be honest, the issue with this is the transparency involved...we constantly move the target on folks...we love changing the rules when it suits us...that's bad business...wholly short-sighted...pure evil in my book.

the modern day CEO need be nimble, need be supported, and need be persuasive.

you should know that things change in the finance industry in seconds...your opinions, your decisions, your likes, dislikes change in a second as news flashes are released, economic news are released, etc. no one in the banking/finance industry is held to their word past a day...the next day could bring about news that treats all the stuff we talked about yesterday as subject....

todays ideas are outdated tomorrow.

[radbag]

Staring into the abyss always focuses the mind, which can help you avoid falling in. So let's take a look at the potential catastrophe that awaits us once we survive our current crisis.

At the dawn of the 21st century the U.S. had $5.7 trillion in total debt. As we approach the end of George W. Bush's presidency only eight years later, that sum has nearly doubled, thanks to war costs, tax cuts, spending increases, expanded entitlement programs, and now a welter of government bailouts and rescues.

This year was particularly bad. The federal budget deficit for fiscal 2008 hit $455 billion, up from $162 billion last year. That figure does not include the cost of the Emergency Economic Stabilization Act of 2008, which has an initial pricetag in the hundreds of billions of dollars. In fairness, some of that money presumably will come back to the Treasury, since the new rescue-related sums will be used to acquire preferred stock, mortgages, and other assets that someday could be sold at a profit.

Yet any such calculations are penny ante compared with the fiscal disaster that is bearing down on America. It's no longer an event in the misty future. It officially began earlier this year when teacher Kathleen Casey-Kirschling of Maryland became the first baby-boom retiree to collect Social Security benefits. She will be followed by about 78 million more boomers over the next 17 years.

The entitlements due from Social Security and Medicare present us with that frightening abyss. The costs of these current programs, along with other health-care costs, could bankrupt our country. The abyss offers no assets, troubled or otherwise, to help us cross it.

Yes, some have suggested less-than-revolutionary measures that could help. Among them: budget savings that would accrue from repealing the Bush-era tax cuts, ending the Iraq war, or expanding the economy after the current downturn runs its course. But even if the economy were to grow at the level of 3.2% a year, as it did in the 1990s, and these other savings were achieved, they wouldn't come close to addressing our federal financial problem.

Nor can we be complacent about timing. The costs of these programs start to threaten our solvency in the next several years. The only way to get across the chasm is to begin making tough choices now to change our current course. Delay will make the problem worse.

In fact, the deteriorating financial condition of our federal government in the face of skyrocketing health-care costs and the baby-boom retirement could fairly be described as a super-subprime crisis. It would certainly dwarf what we're seeing now.

The U.S. Government Accountability Office (GAO), noting that the federal balance sheet does not reflect the government's huge unfunded promises in our nation's social-insurance programs, estimated last year that the unfunded obligations for Medicare and Social Security alone totaled almost $41 trillion. That sum, equivalent to $352,000 per U.S. household, is the present-value shortfall between the growing cost of entitlements and the dedicated revenues intended to pay for them over the next 75 years.

Why call it a super-subprime crisis? Besides its gigantic scale, there are very disturbing similarities between the current mortgage-related crisis and our next potential disaster.

First, like the securitized investment vehicles that blew up, federal programs were launched without adequately thinking through who would bear the ultimate cost and related risk. Just as originators of mortgages let themselves off the hook by unloading packages of dubious loans onto others, lawmakers have increased spending, expanded entitlement programs, and cut taxes while expecting future generations to pay the bill.

Second, just as a lack of transparency associated with mortgage-backed securities resulted in big surprises and large losses for investors, our nation's huge off-balance-sheet obligations for Social Security and Medicare present a threat wrapped in camouflage. After all, the government's "trust funds" don't really provide much security since they don't hold anything but more government debt.

Third, in the same way that private sector "risk management" executives failed to prevent the subprime mortgage crisis, overseers in Congress and the executive branch have turned a blind eye to costs associated with entitlement programs and tax cuts. While lax regulation of banks fed the current subprime crisis, a lack of statutory budget controls has led to a widening gap between the government's revenues and costs.

At the heart of these problems is our leaders' collective failure to act in the face of known challenges. Our country has veered from its founding principles, which held to individual responsibility and accountability today in order to create more opportunity tomorrow. When our constitution was written, the concepts of thrift and prudence were no less at the center of the American spirit than liberty and justice.

During past financial crises and wars, the government went into debt because our nation's survival was at stake. What has changed is that piling up debt has become business as usual, even during times of prosperity.

Today we are headed toward debt levels that far exceed the all-time record as a percentage of our economy. In fact, by 2040 we are projected to see debt as a percentage of our economy that is double the record set at the end of World War II. Based on GAO data, balancing the budget in 2040 could require us to cut federal spending by 60% or raise overall federal tax burdens to twice today's levels.

Medicare, Medicaid, and Social Security already account for more than 40% of the total federal budget. And their portion of the budget is expected to grow so fast that their cost, and the cost of servicing our debt, will soon crowd out vital programs, including research and development, critical infrastructure, education, and even national defense.

The crisis we face is one of numbers and demographics but also of attitudes. Promises were made in an earlier time, when they seemed more affordable. Like homeowners borrowing against the value of their homes in the expectation that the values would go up forever, the American government borrowed against the future and assumed that the economy would grow fast enough to make that debt affordable.

But our national debt is not limitless, and our foreign lenders are not fools. If we persist on our current "do nothing" path, our future will be jeopardized. Americans need to reconcile the government we want with the taxes we're willing to pay for it.

True, attempts at reforming Medicare and Social Security have foundered in the past, and there may be some Americans who think that if the government can bail out the financial sector, it can bail out our entitlement programs. But the political difficulty of tackling these problems, hard as they are, has to be overcome this time.

The next President, working on a bipartisan basis with the Congress, must make sure that tough controls are put in place to get control of the budget, once economic conditions improve. (Example: We can require that all new spending programs, commitments, and tax cuts are paid for by comparable spending cuts or revenue increases in other parts of the budget.)

We'll need to make some tough decisions on which of the Bush tax cuts we can afford to keep, and resolve what to do about the alternative minimum tax.

These problems are not beyond our ability to master them. Social Security can be made sustainable and secure with some modest changes over time in retirement benefits, the retirement age, and the tax structure, as Republicans and Democrats did in the early 1980s.

As for Medicare, there are a number of good ideas that would introduce more cost sharing for the wealthy, increased competition, better cost controls, more use of technology, and other steps to curb the growth of health-care spending.

I urge the government to set up a bipartisan commission that would begin working in early 2009. It should keep everything on the table - all entitlements, other spending, and tax programs - and make recommendations on both sides of the federal ledger.

If we bring together the talent and expertise that abound in our great country, we can see our way through the current financial crisis and find solutions for the next one. From Washington we'll need leadership rather than laggardship. The 78 million baby-boomers aren't getting any younger.

http://money.cnn.com/2008/10/28/magazines/fortune/babyboomcrisis_walker.fortune/index.htm

no question AA...unfunded social security and medicare is a big, big problem...this is why we all owe it to ourselves to make our own provisions and no rely on the government to survive when that time comes....in fact, if i'm to do it myself, i will need a HEALTHY BANKING AND FINANCIAL INDUSTRY....get my drift?

gov't has it's priorities right...the United State of America is a "AAA" rated country...there is no higher rating...our treasury notes and bonds are the benchmark security by which all other securities are measured...the country will have no problem getting their financing....we're not "AAA" for nothing ya know.

[annarborgator]

Always appreciate the views rad...I know that I know very little in this realm...I read quite a bit but that's not a substitute for knowledge/experiences from the field. I honestly believe, in the end, that we need some fundamental shift of values to continue leading the world and by propping up the old guard companies I worry that we're living in the past.

I dunno. I know it's complicated. In some small way, I hate the fact that there's too many variables for me to know and keep in my head all at once. But I also am in awe of our creations. I simply believe we need to refocus in a fundamental way to continue enhancing our standard of living.

[radbag]

your humbleness on topics of banking and finance blows me away given your inexperience in real world application. you're obviously well versed and knowledgeable so it is i who appreciates the views and thoughts expressed.

i don't disagree with you in that you think there needs to be a fundamental shift in values by society as a whole in order to enhance our standard of living.

it reminds me of the boy they've found in the forest who's learned to live primatively amongst the wolves...no tv, no cell phones, no internet, no cars....no microwave, no air conditioning, no iPods, no 'fun'...and you have a boy, his same age, living in the modern world who can't fathom living without.

maybe the hardships brought about by this financial crisis is a good thing no?

[radbag]

btw AA - the president of the american bankers association has fired off a memo to hank paulson expressing dismay re: the rollout of the bailout money citing:

- that the gov't is forcing the banks to participate in the program signaling weakness to the market
- that the infusion program is really not something we really needed/wanted
- that there is criticism from the lenders (the people by way of the gov't) of having to pay dividends

aba prez stating that the banks paying dividends are banks well capitalized suggesting that those particular banks are not misappropriating funds and/or not in need of gov't aid.

[annarborgator]

your humbleness on topics of banking and finance blows me away given your inexperience in real world application. you're obviously well versed and knowledgeable so it is i who appreciates the views and thoughts expressed.

i don't disagree with you in that you think there needs to be a fundamental shift in values by society as a whole in order to enhance our standard of living.

it reminds me of the boy they've found in the forest who's learned to live primatively amongst the wolves...no tv, no cell phones, no internet, no cars....no microwave, no air conditioning, no iPods, no 'fun'...and you have a boy, his same age, living in the modern world who can't fathom living without.

maybe the hardships brought about by this financial crisis is a good thing no?

It CAN be a good thing, if our leaders would focus the issues more thoughtfully. So far, it seems merely to be an extension of "what's the government going to do for me!?" That's not the kind of thinking that's going to lead to a productive long term shift, IMO.