Submitted by: Donald Hank
Banks Forced To Buy Government Debts-The Next Crisis?
Finance: Governments in the U.S. and Europe are forcing private banks to buy up government debts - debts that may turn sour down the road, decimating banks' balance sheets. This is a recipe for another financial crisis.
It has become an enduring national myth - repeated dutifully by Democratic politicians and their mainstream media lapdogs in recent years - that commercial banks "caused" the financial crisis.
They didn't.
Even so, banks are still demonized for it. Because of this, they're now being forced to buy the bad debts of our out-of-control federal government.
This has become a pattern. Remember in the 1990s when banks were assailed for supposedly refusing to lend to minorities. The White House and Congress, then controlled by Democrats, weighed in, using sweeping new regulations and political threats to force banks to lend to people who could not pay back their loans.
The Department of Housing and Urban Development got involved. So did the Federal Reserve. Fannie Mae and Freddie Mac poured trillions of dollars into the housing market. It was a Democratic dream - a market driven entirely by government whim.
Subprime lending surged, all the way until the market inevitably crashed in 2008. Then the very same people who created the mess - Rep. Barney Frank, Sen. Chris Dodd, then-Sen. Barack Obama, among others - blamed the banks when it all collapsed.
The ultimate cost to the economy: at least 5.6 million jobs and an estimated $1.2 trillion in lost GDP.
Four years on, they've learned nothing. It's happening again. Once again, banks are villains. Also once again, they're being forced to do something they shouldn't - this time, buy government bonds that might go bad.
Banks can't say no. They fear the political fallout. So they meekly submit to the government's dictates.
Nor is this just happening here. As a new report from Citicorp analyst Hans Lorenzen indicates, the European Union is doing the same thing - with potentially disastrous economic effects later on.
What happens if Greece goes under? Or Spain? Italy? What if the U.S. declares some of its debts unpayable?
The banks will be stuck with trillions of dollars of bad debts, that's what. There'll be a global credit crunch unlike any ever seen. The world economy could collapse.
This is madness piled on madness. We can't tell the EU what to do, but the U.S. should definitely not be forcing its banks to buy its bad debts. We know where that leads. The 2008 financial crisis showed us.
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