Be elected in a period of crisis, U.S. President Barack Obama faces the daunting challenge of revitalizing the u.s. economy. To date, it has been observed that the United States is still stuck in recession. Now let’s analyze whether Obama can restore the glory of the past.
To decide that if Obama can do it, it’s certainly reasonable that we look to his administrative team before like this there would provide in-depth information about how we will proceed to save the economy.
Today, the administrative team Obama has the same people as Clinton. Among them was Robert Rubin, the former head of Citigroup, who resigned when the company was collapsing received US $ 45 billion in bailout money. Before he was the Vice-Chairman of Citigroup, which violated the Glass-Steagall Act, previously was the Secretary of the Treasury.
The breach of the Glass-Steagall Act existed because Citigroup was now a financial supermarket that could sell both savings and investments that previously could not because of the law. With blessings from Clinton and his administrative team during that time, Citigroup was formed and now could earn much more money. All these are meant to be exposed to increased economic volatility.
Volatility has increased here because Citigroup would sell more risky securities to the public as there was no distinction between savings and investment banks. With this, the public has taken more risk by buying derivatives highly destructive.
This is seen especially in the case of collateralized debt obligations (CDOS) that the public has gotten a lot of. During that time, a boom appeared on the surface with a bubble to be finally stopped growing.
The growing demand for CDOS at that time forced many bankers to grant more loans to lower-rated people. These subprime loans had to be given to providing more CDO for sale. All these went as it was assumed that housing prices would rise.
As a side note, CDOS were sold when the mortgages were packaged into mortgage-backed securities. This meant that the loans were acquired from lenders such as banks and organized into groups and then the bonds were issued on these groups. Investors earned money from interests that give these bonds.
In addition to Robert Rubin, Lawrence Summers (Director of the White House National Economic Council) was also on the team. As many know, was a protégé of Robert Rubin. In addition, he is the mentor of Timothy Geithner (former head of the Federal Reserve of New York and the current Secretary of the Treasury). So, with all these same men that repealed the Glass-Steagall Act still in power, it is difficult for the economy to be revived since they place the root of its decline in the first place.
Also, as many of you may have noticed, politicians to date have used bailouts to save the economy, whenever there is a crisis. The money for the bail-outs are usually provided by the Federal Reserve that it is actually a license to print money. It is not a bank or Government, but a bank owned sign richer today is the world. Money for bail-outs are provided when the Federal Reserve buy bonds issued by the U.s. Treasury and prints the requested amount later.
Here, whenever the Federal Reserve loans money, they will get more interest and with more debt, are enriched with compounding interest. So, the politicians take the economy because they were elected to protect the rich created this system, does not solve the problem.
To date, we see history repeating continuously with bailouts used constantly. In 1990, bailouts have been used for saving and mortgage crisis, but it worked?
The recent crisis in 2008, when Bush authorized the bailout of u.s. $ 700 billion, then Treasury Secretary Henry Paulson (formerly of Goldman Sachs) immediately gave billions of TARP (Troubled Asset Relief Program) for large banks.
The money flowed from the taxpayers to the banks and corporations that have caused the biggest disaster. To add to their irresponsibility, refusing even to explain the use of bailout funds when questioned. Lending also fell despite the fact that the bailouts are expected to increase lending. All these bail-outs have been made to protect the rich and feed the Federal Reserve, with the rich getting richer while the poor are poorer.