meehawl

It is clear that there is a shortage of means of payment during a period of crisis. The convertibility of bills of exchange replaces the metamorphosis of commodities themselves, and so much more so exactly at such times the more a portion of the firms operates on pure credit. Ignorant and mistaken bank legislation, such as that of 1844-45, can intensify this money crisis. But no kind of bank legislation can eliminate a crisis. In a system of production, where the entire continuity of the reproduction process rests upon credit, a crisis must obviously occur — a tremendous rush for means of payment — when credit suddenly ceases and only cash payments have validity. At first glance, therefore, the whole crisis seems to be merely a credit and money crisis. And in fact it is only a question of the convertibility of bills of exchange into money. But the majority of these bills represent actual sales and purchases, whose extension far beyond the needs of society is, after all, the basis of the whole crisis. At the same time, an enormous quantity of these bills of exchange represents plain swindle, which now reaches the light of day and collapses; furthermore, unsuccessful speculation with the capital of other people; finally, commodity-capital which has depreciated or is completely unsaleable, or returns that can never more be realised again. The entire artificial system of forced expansion of the reproduction process cannot, of course, be remedied by having some bank, like the Bank of England, give to all the swindlers the deficient capital by means of its paper and having it buy up all the depreciated commodities at their old nominal values. Incidentally, everything here appears distorted, since in this paper world, the real price and its real basis appear nowhere, but only bullion, metal coin, notes, bills of exchange, securities. Particularly in centres where the entire money business of the country is concentrated, like London, does this distortion become apparent; the entire process becomes incomprehensible.

Tags: banking, capitalism, Das Kapital, economics, Karl Marx by mike
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Financial-market wise guys, who had been seized with fear, are suddenly drunk with hope. They are rallying explosively because they think they have successfully stampeded Washington into accepting the Wall Street Journal solution to the crisis: dump it all on the taxpayers. That is the meaning of the massive bailout Treasury Secretary Henry Paulson has shopped around Congress. It would relieve the major banks and investment firms of their mountainous rotten assets and make the public swallow their losses—many hundreds of billions, maybe much more. What’s not to like if you are a financial titan threatened with extinction?

Tags: banking, corporate welfare, Henry Paulson, plutocracy, Uncategorized by mike
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What does a socialised corporatocracy look like when the veils of “democracy” are briefly lifted? Only a week after the United States’ Federal Government effectively socialised its mortgage industry by taking over Fannie Mae and Freddie Mac (making 50% of existing mortgages and 70% of new mortgages government owned) to add to the existing socialised slice accounted for by the Federal Housing Administration, elements within that same Government are wheeling and dealing trying to come up with some “palatable” way to sell off the high-risk loving, failed investment shell Lehman’s in a way that avoids overtly committing too much public, immediate cash to the bailout. Not because it is averse to using public funds to shore up failed private investment schemes, of course, but mainly because the public kitty is unfortunately a little skint right now and needs another year or two of taxpayer take to fill it up again (about the most it can afford right now is to take an “eBay Approach” of accepting basically any junky crap as collateral for Treasury Notes). And by “palatable”, this means a purchase that would leave the Lehman’s principals with some acceptable bank from the whole mess and not prone to whining too much about it (much as the bid price for Bear Stearns was raised from $2 to $10 after the fact to assuage its major shareholders). Given the juicier targets in play, this seems unlikely.

Of course, the irony that this frantic dealing comes in the same week that the aristocratic division of the US Government (its “Senate”) issued a report concluding that the largest US banks had illegally colluded to enable foreign investment funds and hedge funds to improperly evade billions of dollars of US taxes, thereby profitting from the US market while avoiding any of the (mild) social responsibility to the commonwealth levied as a price for participation within that market and the right to extract wealth from that market. This revelation probably accounts for at least some of the apparent inability or reluctance of the US Government to commit public funds to a Lehman bailout, a factor that is preventing the other, circling vulture-mode banks from quickly “stepping in” to “save” Lehman Brothers. These titans of private enterprise will really only act in cases like this when their risk is diminished by large tranches of public funds, or loan guarantees.

Some of the country’s biggest investment banks and brokerage firms — including Morgan Stanley, Lehman Brothers Holdings Inc., Citigroup Inc. and Merrill Lynch & Co. — marketed allegedly abusive transactions that helped foreign hedge-fund investors avoid billions of dollars in U.S. taxes over the past decade … Wall Street firms actively competed with one another in dreaming up complex transactions that allowed hedge funds to avoid withholding taxes imposed on dividends paid by U.S. companies

The strategies enabled investors to avoid paying the 30 per cent withholding tax on income by treating dividend payments as returns on so-called equity swaps, stock loans or other derivatives transactions … Transactions by Lehman Brothers, Morgan Stanley, Citigroup, Deutsche Bank, UBS and Merrill Lynch are included in the report … Lehman estimated that in 2004 alone its transactions enabled clients to avoid as much as $115m in dividend tax payments.

Foreigners who invest in the United States are exempt from many U.S. taxes. If they invest in a U.S. company that pays a dividend to shareholders, however, U.S. law requires foreign investors to pay taxes on the dividends they receive. Dividends sent abroad are meant to be taxed at a 30 percent rate in most countries and at 15 percent in countries that have a tax treaty with the United States … Many foreign shareholders never pay the dividend taxes they owe, in part because banks are helping them escape paying them.

This is what a dictatorship of the corporatariat looks like in the early 21st century, what Orwell might have called oligarchical corporatism. While the political theatre of the US public elections continues with alarmist mutterings about the “cost” of paying for a socialised healthcare system or a class-based downward trend for the redistribution of wealth emerging within the cacophony of the “culture war” cries of sexism, racism, ageism, competing religiosity and cronyism, behind the veil vast dynamic and interlocking financial and political directorates set the agenda and operate the mechanisms for the real, upward redistribution and allocation of productive wealth to the ownership class, many of whom owe no allegiance to any particular national government.

Tags: banking, Bear Stearns, Citigroup, corporate welfare, corporatocracy, Deutsche Bank, Fannie Mae, Federal Housing Authority, FHA, Freddie Mac, Lehman Brothers, Merrill Lynch, Morgan Stanley, UBS by mike
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An exodus of foreign capital is forcing Russian banks to slash lending as the international reaction to the country’s military stand-off with Georgia starts to affect the real economy. Bankers say Russia is facing its worst crisis since the August 1998 default. The Russian stock market has plummeted more than 40 per cent since May. A flight of capital estimated by analysts at up to $20bn (€14bn, £11bn) since the start of the conflict is drying up liquidity. The Russian trading system index fell another 7.5 per cent yesterday to its lowest level since June 2006 … Cash held by banks on deposits at the central bank has been falling day by day, reaching a low of 638.4bn roubles ($25bn, €18bn, £14bn) yesterday from 675.6bn the day before.

Tags: banking, finance, Georgia, money, Russia, Vladimir Putin, war by mike
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