May I Have A Bail Out?

     OMG! I looked at my bank account and saw that I was down to my last dollar.  I totally forgot to transfer money into that account to cover my automatic withdrawal.  I’m sure this happens to many people, and if anyone is like me, they’ve wiped the perspiration from their head and sighed, knowing that a bullet – the thirty-five-dollar fee – was dodged.
     As I explained to my daughter, “You never want to overdraft and overdraft protection doesn’t save you from fees.”
 

I’m sure most banks are like mine, as I bank at a multi-branch bank found in just about every state in the U.S.  There is a fee for everything.  I’m charged a fee, even if I don’t use my card ten times in a month.  UNBELIVEABLE!  As a student in high school consumer’s education, I was led to believe that saving money was a good thing.  Now, under the current banking system, I must swipe my bank card ten times in a month in order to avoid the $5 fee.  Isn’t this like paying to saving money?  I say it again OMG!

 This sudden realization caused me to think about the banking system. Let’s go back to October 3, 2008, when the Senate passed a bill to bail out the banks with 700 billion dollars. From where did that money come?  How does the government get the cash to bail out the banks?  Why was this necessary in the first place?

    
     Without the intent of boring the reader much, I will share my understanding. First, without the bailout, our economy would have completely crashed without hope for recovery.  Take a small tax business for example.  The owner, hires as many people as he needs to work for a short, four-month period.  The owner borrows money from a bank to pay his employees until revenue comes.  In a crashed economy, that owner could not borrow the necessary cash and, therefore, could not afford to hire workers.  Now, imagine his company is a large one that has pay health insurance, payroll, and other benefits that requires cash loans or lines of credits – big problem, right?  Although this is a simple example, there are many other, more complex situations that could have led to disastrous outcomes and extremely high unemployment. 

     After 911, the Federal Reserve Bank lowered interest rates to 1%.  As a result, companies and banks were able to borrow money at very cheap rates.  This also meant that big investors who purchased treasury bonds from the government would get no returns on their investments, so they stopped buying the bonds and turned their attention to investment banks.  Take this example:  Mr. Johnson and his wife purchased a house.  They hired a broker whose job was to find a lender and receive commission.  The lender, who owns the mortgage, sells it to an investment banker for a profit.  The investment banker borrows from a bank like the Feds and buys more mortgages.  In the Johnson’s neighborhood, there are six neighbors who now pay the same bank and are placed into three categories: safe, average, and risky. Two of those neighbors, classified as “risky” eventually default on their homes and the bank seizes them.  Another homeowner is victim to company downsizing and cannot keep his home, so he short- sells it to avoid foreclosure. Now one house has sold under market value and two other homes have been foreclosed upon without being resold.  The investment bank, with empty homes in its possession, now refused to purchase more mortgages and the lenders issue fewer loans due to a decreased demand for homes. These three empty homes in the Johnson’s neighborhood cause the value of Mr. Johnson’s home to decrease lower than his purchased price.  He now owes the bank more than what his house is worth, so he short- sells. The short-sell causes the value of surrounding homes to drop influencing his neighbors to also sell their homes below market value.  Eventually, the bank’s income decreases, and stock holders sell their stocks, which makes the value of the bank fall and the housing market comes to a stop. 

   So, to save the banks and in turn the future employment of millions, the government bailed out the banks with tax payer’s money and the banks increased their fees on everything as if they are charging the customer to repay the government.  

 Keeping in mind that the cause of the collapse in combination with some things that Bill Clinton did to encourage irresponsible lending, was the Feds.  There is much to say about the Federal Reserve Bank and the power it has over our economy.  In my novel Men, Djinn and Angels – Awakening, the Enlightened Titans secret society’s involvement with the creation of centralized banking depicts the push that secret societies had to establish centralized banks.  In the story, the brotherhood investigated, instigated and eventually caused the English crown to spend so much money on the Glorious Revolution that it needed to borrow money from the private sector which created the Centralized Bank of England.  This is not far from fact as the old lady of Treadneddle Street became the model for future centralized banks throughout the world. 

 There is nothing Federal about our Federal Reserved Bank.  It is a private owned bank that, according to some, is unconstitutional.  In the Constitution, section 8 of article 1, the U.S. government is granted the power to coin money and regulate its value. Being that the Federal Reserved Bank is not part of the three branches of government, it should have no authority to make coins or regulate its value. But in 1913, Congress gave the Federal Reserved Bank its power.  Sense then, the bank has controlled the inflation, the stock market, job market and in some areas, the effectiveness of the U.S. presidents.  Two such examples are Jimmy Carter and Ronald Reagan, both faced economic policy failures due, in part, to the hardline policies of the Federal Reserve Bank’s board of directors. 

In all of this, what can we do?  Probably nothing more than make enough personal adjustments to keep our heads above water and if we’re lucky, find a tree branch to pull ourselves from it before we’re sucked into a whirlpool.  Still, I can’t help but to ask myself.  Being that the tax payers bailed out the banks, shouldn’t they owe us a little something?