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  • July 17, 2009 09:48 AM EDT by Cody Willard

    How they destroyed our economic system as they said they were saving it

    As a kid, I often got to stay up late on Thursday nights and watch Hill Street Blues, a great cop show based in Chicago. For the first few seasons, every episode started with the cops all gathered for their morning meeting, listening to their supervisor, Sergeant Esterhaus, tell them about what to expect out there – the latest crimes, what criminals to look for, and what else they needed to be on guard for that day. Sergeant Esterhaus used to finish each of those meetings with the phrase, “Let’s be careful out there.”

    As an adult, I often stay up late staring at the ceiling in my apartment in NYC. For the first few seasons here, I used to wish for Wall Street and the banks and the people gathered to work there to make lots of money. I hated that the banks used the Federal Reserve system to covertly transfer wealth from the hardworking American’s pocket to their own by allowing banks to borrow welfare money at below-market rates that they could then lend out at higher rates 10 or 20 or even 30 times over to people and businesses that the banks figure would pay them back. I mean, at least, I knew (or so I thought) that if the banks lent that money out poorly or if they lied about how they were actually gambling that money in a bunch of risky ways that they’d lose their asses.

    That all changed in 2008, when the Republicans and Democrats in power sent $2 billion of welfare money directly to Bear Stearns’ shareholders and sent $29 billion of welfare money directly to the people who were stupid enough to gamble their own money by placing bets with Bear Stearns without having bothered to make sure Bear had enough money to pay the bets. That covert transfer of wealth that the Republicans and Democrats in power had used to enrich their banker friends since they’d created the Fed back about 100 years ago, suddenly turned overt.

    Remember the logic back then? “If we don’t give $2 billion of welfare money to the people who risked their own money on the future earnings potential (or lack thereof) of Bear Stearns and if we don’t give $29 billion of welfare money to the hedge funds and other banks who gambled at the Bear Stearns casino, then our entire economic system will collapse.”

    Well, our system soon started collapsing anyway, and just a few weeks later, the Republicans and Democrats in power sent what’s now almost $200 billion to the shareholders and gambling clients of AIG. Those gambling clients included Goldman Sachs, which was placing huge bets at AIG against the very products Goldman was selling to states and countries around the world as “safe investments”. Remember the logic back then? “If we don’t give hundreds of billions of welfare dollars to the guys who were betting against the products they’ve been selling to other people as ‘safe’, then our entire economic system will collapse.” Goldman got about $20 billion out of the welfare money we sent to pay off the gamblers who placed their bets at the AIG casino.

    Well, our system soon started collapsing anyway, and just a few weeks later, the Republicans and Democrats in power who had told the renters and the savers of the world that the only way Fannie Mae and Freddie Mac would ever hurt them was the covert method of transferring their wealth to those people rich enough or stupid enough to risk money on real estate ownership, had to come back and overtly transfer trillions more. Yeah, they came back to the renters and the savers and told them that if they didn’t take immediate ownership of all these trillions of dollars of of below-market-rate loans to these rich/stupid real estate owners what won’t be paid back that “our entire economic system would collapse.”

    Well, our system soon started collapsing anyway, and just a few weeks later, the Republicans and Democrats in power sent $800 billion of welfare money to EVERY big bank in the country. Why? I still don’t get it, but apparently, they figured taking the money from the savers and renters and giving it to the crooks at the investment banks who had been saying their balance sheets were fine even as they lent out money and/or packaged products of loans that had been made out to people and businesses that couldn’t pay it back would “finally, once and for all, stop the entire economic system from collapsing.

    Well, our system soon started collapsing anyway, so the Republicans and Democrats in power told those investment banks to go ahead and take every single dollar they’ve got – the $800 billion of the bank bailout welfare money, the $200 billion from the AIG bailout welfare money, and another other money they can get their hands on – and to go gamble it at each other’s casinos again. They said that if the renters and the savers of the world wouldn’t pay for any and all losses these banks might end up making in the markets then our entire economic system would collapse.”

    And so here we are. We’ve sent trillions of dollars of welfare money to the crooks on Wall Street who lied repeatedly to all of us about the risks they were taking with our deposits and our investments and we’ve told them that if they ever lose any money again not to worry about it because we’ve “guaranteed” their losses, and guess what?

    The banks used the money we’ve staked them and went to each other’s otherwise-unfunded casinos and gambled. Guess what? Most of ‘em had a hot streak for the last three months. And so they report “record earnings” at some of these places and the renters and the savers are supposed to be all happy for them?

    Meanwhile, our entire economic system has indeed collapsed. Unemployment’s shooting into the double digits, GDP is in decline and Americans are in exactly the kind of financial pain that they told us we wouldn’t be in if we’d just give trillions of welfare dollars to Wall Street. Now we no longer want Wall Street to make money – making money on Wall Street in 2009 means that you profiteered by gaming the system well using taxpayer largesse as your capital base and knowing that you’d never have to deal with any losses.

    Had we not bailed out Wall Street and the homeowners, there would be companies and people who had been saving and preparing for this downturn who then could come in and buy up the assets and hire the employees from Goldman Sachs, GE Capital, Citigroup for pennies on the dollar. Housing prices would have already dropped to levels where those renters and savers could step in and be rewarded for their responsible planning and buy those homes at once-in-a-lifetime prices that would make them rich like the bankers we just bailed out.

    And our entire economic system would be fine.

    Instead, somewhere in 2008, as I told viewers on Happy Hour on September 12, 2008, the day after the Republicans and Democrats in power voted for TARP – our entire economic system has indeed collapsed because they destroyed it with the policies they created supposedly trying to “save” it.

    Wall Street and every single policy coming out of Washington DC is geared towards redistributing wealth upwardly and protecting the ownership/corporate/banking class of this country on the backs of the responsible saver and renter.

    I feel like Sergeant Esterhaus when I talk to investors these days. We’ve got to protect ourselves from all the crooks and crime and theft and violence emanating from Wall Street and Washington DC. And as he’d tell ya, “Let’s be careful out there!”

    Follow me on Twitter at http://www.twitter.com/codywillard

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Hector Maquieira

Okay shane, if the unemployment numbers are made up then why are we even having this discussion... By the way, when did the numbers become made up? On January 20, 2009? Please, your no better than those conspiracy theorists who say we never got on the moon... What the hell does kool-aid have to do with anything?

July 21, 2009 at 11:25 pm

MonarchAZ

Thanks for keeping some reality out there Cody. It's interesting that when CIT was refused welfare money last week they and their investors somehow found a way to save themselves. Can't help but wonder where the country would be today if we'd said "NO!" to the outreached hands of all the other failures of Wall Street and banking. In 1802 Thomas Jefferson said: 'I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.' WAKE UP AMERICA!

July 21, 2009 at 11:22 am
(1 Reply)

shane

I see Hector's been drinkin the government kool-aide. If anyone believes the unemployment numbers given by our government or any of their other economic numbers is delusional. All the numbers we are fed by the government are given as a means of keeping delusional gamblers going to the betting casinos that the banking cartel created. A simple study of how the Clinton administration changed the way unemployment numbers were recorded is one of many examples. Open your mind Hector. Things are not as you have been told. Keep up the good work Cody. And "do stay careful out there."

July 21, 2009 at 5:59 am

Hector Maquieira

"Unemployment’s shooting into the double digits" Umm... Unemployment crept up .1% in June, from 9.4 to 9.5. I'd hardly call that shooting. It's not a given we'll hit 10%... Once again, you are distorting the facts. We Report. You Decide. Leave the deciding to us please.

July 20, 2009 at 8:51 pm

Hector Maquieira

What are you taking about Cody? The stock market is doing fine, just went up 1.2% to a six month high, right after you said on your shot clock Friday that you would go short on the DJIA to 8500.... Look, the Fed let Lehman Brothers go bankrupt with zero bailout money and it turned out to be a disaster. If we let AIG or Merril Lynch or even GM go it would have been many times worse than the Lehman debacle. Sorry the Dems won in November, but being bitterly hateful isn't going to help anything... DJIA is up almost 900 points since Obama took office. I know unemployment is still going up but it's a lagging indicator. Cody is an idiot; The economy is on the right track.

July 20, 2009 at 8:49 pm

Charles

Cody, I understand that being a "saver" is a good thing. "Renting" is a debateable practice but necessary to many. I see quite a bit of resentment for ALL homeowners. I suggest that you be more specific when reffering to them. Please specify that you are reffering to the unresponsable homeowners and the homeowners that lack judgment. Please keeo in mind that there are several homeowners out there that are responsable and are still paying for their home, dillegntly and responsiability without any welfare from the government and avoiding penalizing the "savers and renters."

July 20, 2009 at 2:55 pm

mike burns

I'm glad that they're destroying the system. Once per generation Americans need to be reminded how bad it is to let gov't control the economy. In the 1930's we had FDR. In the 1970's we had Nixon/Carter. And now it's time for Bush/Obama to prove it to us once again. Bring on The Collapse.

July 20, 2009 at 2:09 pm

Steve

This blog really depicts the horrific state of our economy...I'm a recent college graduate that just launched a new website: FthisEconomy.com to give us all a good laugh during these tough times.. It's a website where users can submit their f this economy stories so that other users can get a good laugh from other peoples misfortunes.. Check out my website today and submit your FTE!

July 19, 2009 at 10:15 pm

John Gilbert

This is a plutocracy, plutarchy and plutonomy.

July 19, 2009 at 8:07 pm

Dave

Billions have been lost by other countries who trusted and believed what they bought from the USA for their pension funds and other such entities. I don't hear much news from other countries, who must be seething with anger, at what "they thought" they purchased. I would think their government would be knocking on our government's door and probably saying "Hey, you better come clean and make restitution here.". But we will never hear about that of course. I'll be it's already happening.

July 19, 2009 at 6:12 pm

Sanford

So...if all this gambling has been fiduciary iresponsibility, why aren't the American people clamoring for some re Why are the leaders out of control????stitution? And why do the crooks who were in charge get to stay in charge? Isn't America a anotion governed "by the people" and "for the people?"

July 19, 2009 at 2:00 pm

Mark P

FOMC is the politburo.

July 17, 2009 at 10:10 pm

Jim Stewart

Congratulations to Fox News for being the only major broadcaster or publisher to defy the pressure from Federal Reserve Bankers and their Wall Street mates. Keep it up and Fox credibility and ratings will grow at the expense of the likes of CNN & NYT. They spread those lies of Federal Reserve Bankers pretending to be saving a system that benefits the people. No doubt Federal Reserve Bankers will then try to use their fraudulent system to bail out the likes of CNN & NYT! Will Fox News investigate and report the news when the Federal Reserve Bankers try to bail out CNN & NYT!

July 17, 2009 at 9:45 pm

6ftRabbit

I give up. I'm just gonna go down to the bank and borrow enough money (to avoid bankruptcy) and spend it on a new truck with the free AK-47 that fella in Missouri is offering.

July 17, 2009 at 4:19 pm

RW

It's not just immense welfare to the rich; it is also even more welfare to the poor. Who gets squeezed? The middle class and the not-so-ultra rich. The elite make more money, and gain voting blocks through welfare. Screw over the "middle" part of the population because they are not big enough in number or status to matter. Who else gets squeezed? Our children and grandchildren who will be paying the debt. Debt that funded welfare to the ultra-rich and the poor. Who takes out debt to pay for other people's ills? Makes no sense, unless you are an elite politician.

July 17, 2009 at 1:26 pm

Jack Frayer

It is not personally satisfying to be the lonely voice of reason when all the leaders continue to reap the whirlwind. All would have been forgiven if unemployment were reducing and the American worker felt that hope was on the horizon. But, the plan is to have several years of high unemployment and for the average US citizen to bear all the pain. Just look at the June FOMC minutes.

July 17, 2009 at 12:54 pm

FED UP

Let it not be said that we were not warned by our founding fathers, or even modern day patriots like Dr. Ron Paul. "If the American people ever allow private banks (the Federal Reserve Banks) to control the issue of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their fathers conquered.." --Thomas Jefferson

July 17, 2009 at 12:51 pm

EDUCATED AMERICAN

Let it not be said that we were not warned by our founding fathers, or even modern day patriots like Dr. Ron Paul. "If the American people ever allow private banks (the Federal Reserve Banks) to control the issue of their currency, first by inflation and then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their fathers conquered.." --Thomas Jefferson "Educate and inform the whole mass of the people... They are the only sure reliance for the preservation of our liberty." —Thomas Jefferson

July 17, 2009 at 12:49 pm

George Smith

Sadly now that this has happened, we do not as a society have the money remaining to do the things that should be done, such as really building infrastructure and creating domestic energy sources. We need to build a vision in the people and get them believing that they "have" a future, and so be willing to risk some consumer spending. For now everyone can see that we are just using the last bit of momentum of "wealth and hope".

July 17, 2009 at 11:39 am

about this blog

  • Cody Willard is an anchor on the FOX Business Network. Willard is also the principal of an investment management company. He was a long-time featured columnist for the Financial Times and TheStreet.com as well as a regular featured economist and stock picker on CNBC's ''Kudlow & Company."

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