Dismayed Land

Hong Kong Disneyland, America’s iconic theme park in China, like America’s iconic financial institutions doing business in China, received a financial wakeup call in late 2007 when they reviewed their year end operating results and discovered they got it wrong and were operating at a loss. Not because of their dealings with the Chinese, but corporate mismanagement, reckless projections, stratospheric expectations and misguided promises ─ by bankers and their government regulators at central banks.

Yet these bankers are rewarded for their misdeeds with handsome severance packages while the regulators continue to espouse and promote deregulation. The global meltdown of 2008, that started with subprime, is the third financial crisis I have experienced in 20 years caused by bankers and their regulators that We the Apathetic Maids repeatedly allow to happen ─ and then pay to clean up the financial wreckage. First there was the savings and loan crisis of 1989, followed by the Enron/Worldcom crisis of 2002 and the grand dame of financial crisis, the global bank run and meltdown of 2008.

The world celebrated Martin Luther King’s birthday in 2008 with a financial fireworks show the likes of which the world has never experienced. First, Federal Reserve Chief Ben Bernanke makes a surprise un-scheduled 75 basis points rate cut after global stock markets collapsed, followed by an announcement by French bank Societe General that it was the victim of a $7.1 billion fraud by a rogue trader ─ the world’s largest. Understandably, financial markets panicked.

The rate cut was too little and to late and further exposed how out of touch Washington policy makers are with the severity and depth of the financial meltdown. The financial dominos were not stopped from falling by the Federal Reserve or the government’s rescue plans. The hastily drawn up “shot in the arm” of between $140 to $150 billion, or about one percent of the US gross domestic product, of tax rebates was the result of panic in the White House at the unraveling of the global financial architecture put in place by America as a component of globalization. Any wonder U.S stocks fell further after Bush’s announcement of his plan to post their biggest weekly drop in five years? That is just the beginning of the panic selling. Some fund managers predict the Dow Jones Industrial Average will plunge to 6,000 points by the end of the year, shedding more than half its value.

No one really knows how bad the subprime crisis is. Losses may soar to $500 billion. The Bank for International Settlements said credit default swaps totaling $43 trillion, half the entire asset base of the global banking system were outstanding at the end of 2007. Total derivatives are estimated to be in the $500 trillion blackhole ballpark. Any wonder financial markets are anxious and politicians in Washington are blamed for the lack of regulation and oversight? Politicians in both parties should be panicked.