Last week’s bail-outs by the Federal Reserve Bank and Treasury in the US demonstrated how seriously the government and financial sector treat the current situation and that they are prepared to go to great lengths to prevent the financial system descending into total collapse and to defend the most powerful citadels of the capitalist system.

They have brought a short-term reprieve, halting the downward plunge on stock markets and partially restoring some of the most recent losses. This relatively small lift in share market indexes should not be taken as an indicator that the worst is over, as suggested by some economic commentators attempting to talk up the economy.

This was confirmed on September 20, when the Bush administration announced that it was seeking a blank check from Congress of up to $US700 billion to buy up distressed mortgage-related assets from private firms. To put that amount into perspective, it is more than the annual budget for the Pentagon — more than $2,000 for every man, woman and child in the US (comparisons from New York Times, 21-09-08).

This is the same administration that preaches the free market gospels and says government has no role in social welfare. When it comes to the financial gods, Bush’s “no bail-out” policy was thrown out of the window, and the dollars gushed out of the corporate welfare tap.

“This is a big package because it was a big problem,” Bush said in defence of the $US700 billion proposal. He made the point that “the risk of doing nothing far outweighs the risk of the package, and that, over time, we’re going to get a lot of the money back.” There are, of course, other ways of doing nothing!

The Democrats have agreed to support the Bill when it hits Congress this week, on one condition: that the Bill also provides help for ordinary people in the form of an economic stimulus package. Democrat House president Nancy Pelosi said the “Democrats will work with the administration to ensure that our response to events in the financial markets is swift, but we must insulate Main Street from Wall St and keep people in their homes.” Ms Pelosi said that the Democrats would insist on “enacting an economic recovery package that creates jobs and returns growth to our economy.”  (Stop!  I cannot contain my laughter)

Bush portrays the bail-out of the financial sector as helping every American. In reality, it is a scheme to transfer the losses of the financial conglomerates onto American taxpayers.