United States Financial Meltdown (A Special Report)

A Note to Senators Barack Obama and Senator John Mc Cain And the Voters of America.

In the 1980s, American TIME magazine devoted an entire edition to evaluate whether capitalism was working. I would request that prestigious media to review the question again, in the light of the on-going fragmentation that has taken place in the financial system of the United States. The current financial crisis on Wall Street is a disturbing report on the financial health of the United States and this has a way of impacting on the European and Asian stock markets.

 The effect of this melt-down will reverberate around the globe for quite sometime.  It will not be enough to give financial life-line to the ailing companies. There is an urgent need for corporate turn-around of these businesses in order to cushion the financial “big bang.”

First of all, each company must undertake an immediate diagnostic review of their firms, provided that they are not already in the cold-room of the undertaker. Extending cash loans may not halt the extraordinary financial crisis some of these companies find themselves. Outright sale has been stalled because no-one wants to throw his money into a bottomless pit.

Stock relief measures granted to some companies, can only help in the short run. It will be incumbent on Central banks to increase funding and impose tighter regulatory controls. New liquidity measure should be comprehensive and far-reaching. There should be strict sanctions for banks and other financial institutions which derogate from the new regulatory measures. After all the peoples’ money is not for Casino lucky dip games.

 After 158 years of excellent banking operations, the Lehman Brothers have declared bankruptcy. AIG Insurance Company is in serious trouble. We watched, with whispering hope, as AIGS’ stock took a free fall since November, 2007.

 The manifold disasters in the US in recent years seem to have increased claims payments. Premiums have been slow in coming. This is an unhealthy situation for any insurance business. Since nature must have its way, uncertainties will continue to manifest in the insurance industry.

The Bank of America has acquired Merrill Lynch for 50 billion dollars. After completing the stock transfer forms, priority loans repayment must be separated from subordinated loans, so that the new management of Bank of America/Merrill Lynch will have a clear picture of the new company’s financial account balance. Sundry creditors and sundry debtor’s accounts must also be reconciled. They should evaluate Merrill Lynch accrued interest, this is the amount of interest, accumulated but not yet paid on their deposits or savings account. After this, a corporate turn-around mechanism could bring about a solid swing, in about a year or two.

Morgan Stanley has recorded dwindling fortunes, while Lloyds TSB took over Halifax Bank of Scotland. The financial crisis has forced Russia to allocate over 400 billion dollars to beef up some Russian companies.

The American financial crunch has caused some commentators to review the workings of the American economy, in the last twenty years. During the Allan Greenspan years, a liberal economic regime permitted mortgage-backed securities, steady decline in the value of the dollar, allowing clients to hold loans beyond redemption dates; banks were subsidized to give loans to clients to buy houses.

There was a swarming hive of over-paid CEOs, whose cuisine was always garnished with lobsters in olive oil. This, they downed with flaming red wines. A CEO, who often has lip-stick on his collar, always “with a jar of wine besides him”, may not care to look at his company’s financial accounts. “He takes the heavens for a tent and the earth as a mat. Then, he is in harmony with the life-giving forces.”(Zen Buddhist of the Ming Dynasty).

Lack of financial prudence led, in a few cases, to corporate nightmares.Also, there were curious, quick and padded write offs. All these were the characteristics of apparent failures by financial regulators. Although these measures were aimed at permitting flexibility in the financial system, the chickens have now come home to roost.

Fannie Mae and Freddie Mac housing giants have suffered heavy losses in their mortgage business, from which they are not likely to recover soon. Hewlett-Packard is poised to cut 24,000 jobs and many other US companies will follow suit. European and Asian Pacific stocks are all down causing panic in London and Hong Kong. The financial accounts of Barclays Bank are not in order, which was why they backed out of the take-over deals they had shown interest in earlier.

 By August 2008, the bank had written off over 40 billion dollars, which is more than it can chew, so to speak. We think that Barclays Bank should re-consider its decision not to extend assistance to Lehman Brothers. Tomorrow will surely come, with its share of uncertainties. What are corporate friendships for? All those invitations to exotic parties and after dinner speeches cannot be easily forgotten.

The United States Government reversed its decision not to rescue Lehman Brothers and AIG by bailing out the companies with billion of dollars, which financial analysts think will put tremendous pressure on the Federal Reserve balance sheet. Investors will possibly consider investing in commodities rather than in stocks for now.

In Italy, Prime Minister, Berlusconi said that he was trying to see what he could do to reverse the fortunes of Alitalia, which declared bankruptcy last month. Although he has been speaking in the language of privileged government, investment experts in Milan are skeptical because of the unrelenting and belligerent stance of the trade unions and vocal stakeholders. Alitalia may wish to consider introducing shares option scheme, for its employees to calm their nerves.

The Bank of Japan promptly injected 248 million dollars in order to shore up any further decline in the fortunes of the Japanese economy. Euro-Asian Central Banks, including Russia quickly injected funds and replaced CEOs, who did not react in good time to prevent unbridled lending. Some financial experts are advocating the harmonization of the economic and industrial policies of UN Member-States and the elimination of disparities in the level of development of Member-States and that they should grant each other the most favoured nation treatment.

It is trite logic to ascribe the proximate cause of US financial problems to the fact that in the last eight years, the US has been managing a war economy. Between 1930 and1938, Germany had a strong economy with machine building as it’s most lucrative sector, as could be seen in the fortunes of “Krupp Stahl” GMBH. Adolf Hitler frittered away all the fortunes of Germany, in his hegemonic enterprise.

World economic history records the activities of the United States in global economic development as very constructive. The US was an initiator, active participant and finisher of well-designed global economic projects. After the world economic depression of the late 1920’s, there was an unprecedented depreciation and disintegration in world trade.

The US helped to evolve an international monetary policy, caused the removal of artificial trade barriers, boldly and imaginatively confronted the “creeping miasma of political and economic ideology, closely related to the polar economic structures between the industrialized and non-industrialized states”. America helped to re-organise the post- Second World War economy in Europe, in a profound and lasting manner. European and world financial institutions were set up, mentored and nurtured by the United States of America. Imaginative Secretary of State, Cordell Hull, and genial George Marshall, turned Europe around from the devastations of Hitlerism.

The hare-brained policy of “not talking to rouge states” is neither here nor there. If Professor Dr. Henry Kissinger did not talk to the Chinese in the early 1970’s, where would American firms have outsourced their companies to, in 2000?  As of now, China is decidedly America’s very good trading partner, all that pretentious talk about human rights notwithstanding. In the last three years, the US Secretary of the Treasury, Paulson has visited China many times, to strengthen the competitive position of American firms in China.

Since 1960, American governments have engaged the world community in constructive pursuits. The Kennedy Rounds of Tariff Negotiations were later followed by the Uruguay and Tokyo Rounds up to the Doha talks. Imaginative and innovative thinking has been the hall-mark of American diplomacy until George W. Bush turned the US economy into a war economy and while fighting terror militarized the psyche of political mal-contents around the globe.

States that could have been involved in a diplomatic and military offensive against the forces of evil became alienated by Bush’s belligerent tone and “shikoko attitude.” His allies systematically lost elections and went into political oblivion. His once beloved associates have de-camped and have written both constructive and sensational memoirs to denounce his style and direction of foreign and domestic policies.

The collapse of century-old financial institutions in America, which were the ladders that many Americans climbed to fortune and well-being, is a befitting legacy of an administration that loved the Iraqis and Afghans more than his Louisiana compatriots. Charity deserted home! The current economic down-turn in America can be traced to the wars in Iraq and Afghanistan and maintaining troops in all the continents of the globe. These have taken a toll on American resources. Many citizens now find it difficult to reconcile the present with the past.

Under the current deteriorating economic conditions, there is urgent need to relieve the unemployment situation, stem the increasing outflow of jobs and foreign exchange, in order to diffuse mounting social and political tensions. Amidst these inter-locking circles of misery, a bounce-back is not foreseen soon because of the evolution of production fragmentation, which include “the quality of institutional frameworks, the cost of establishing a new business and the quality of infrastructure”, in the United States.

 The emergence of China, Russia and India as economic powers has reduced American exports to those states. These nations now lead global integration and international cooperation. Reports from Arab States say that the region is financially buoyant and is doing business as usual.

The total neglect of the Continent of Africa as a trading partner yielded the Chinese the opportunity to engage in international trade with Africa. America lost the advantages of economic engagement with Africa, as a result of poor and biased press coverage about developments in the continent. An agreement establishing Investment and development strategies with Africa would have been better received than the Gulf of Guinea Military Strategic arrangement.

Right now, American banks can establish Accepting Houses, Acceptance credit facilities to enable African entrepreneurs buy American goods.These will boost clients’ accounts receivable in aid of business promotion. Granting amortization to credible business houses in Nigeria will foster the capacity of the companies to expand their import abilities.

Since the dollar plays a major role in Nigeria’s international finance mechanism, Arbitrage firms and allied agencies are necessary for foreign exchange deals. Although the Central Bank of Nigeria has lessened the hardship in this area, serious problems still exist as bullish speculators complicate our banking practices. We still encounter automatic transfer hiccups.

After NICON INSURANCE Plc was re-capitalized fully and its license was re-presented, a successful turn-around by the Chairman and the Board of NICON INSURANCE, Nigeria Plc took place, followed by multi-million acquisitions of hotels and a national newspaper. Some Nigerian financial institutions that front for the affected multi-nationals in Europe and America have reasons to panic.

The US economy needs turn-around experts to undertake appropriate diagnostic review and put in place new business plans. Outsourcing of American companies overseas, regular cuts in the work-force, inability of workers to meet up with all sorts of bills, high charges on credit, taxes, the inability to provide collaterals for loans, compound interests, consumer credits, poor credit ratings, all  have created unpleasant  living environment in America.

 Economists say that theoretical and empirical evidence abound that benefits from business are still available. Active international trade will have mutually beneficial results, if an aggressive new programme is pursued by the new US government.

These are the reasons why the November 2008 Federal Elections in the United States are considered very crucial in framing the synthesis of better life in the years ahead. To restore America’s glorious days, the voters must see the elections not in terms of an African-American becoming the President of the United States, but whether he has the inherent abilities to govern, which is not in dispute.

Considerations of who will fight wars better, in future, beg the issues. The strategy is to employ diplomatic skills to prevent those incidents that lead to war by talking, even to perceived enemies.

The people of America, a kind and generous race must discard primordial sentiments and chose a government with which the international community will be comfortable with. The notion that America is a peaceful country which must occasionally fight wars to prove it is antiquated and discredited.

America needs to have a flexible but controlled immigration policy. Efforts must be made to talk to perceived enemies of America. A permanent state of siege profits only gun manufacturers and politicians. The civil society, which pays for war should tell me what the jobless man in Ohio will gain after the Arabs became democrats.

 Right now, Iraq has billions of petro-dollars. How much of this will be paid into the American treasury for American’s use? Who is fooling the masses? Surely, something for nothing cannot be the basis of international relations.

The AMERICAN WORLD REDEMPTION CRUSADE has lost its ancient appeal and Americans must have a re-think. The US has just suffered terribly from formidably named HURRICANES. I have not heard citizens from other nations offering a helping hand.

In the 1960s, Russians also engaged in internationalism to the detriment of its own people and the Soviet Union. I am not saying that big states should not assist poorer ones, but there should be a limit. There should be no ideological impositions and the establishments of regimes of capitulation and consular jurisdictions, which tend to prolong foreign military engagements.

A financial meltdown in the US is a frightening proposition. It will lead to more crimes, hardship, social dislocation and “winds against their souls”. Using the ostrich approach and saying that it is well, falls short of the objectivity which the US Emergency represents.

Injecting 168 million dollars into the economy is a drop in the ocean. America should aim at specialization and economies of scale in order produce goods at competitive prices. It should plough back war-wasting resources into the advancement of new technologies in order to lead the world again to forge closer integration among states in a globalized world.

A new financial regime must replace the pre-crisis era. Oil-dollars, platinum-dollars and gold-dollars, should replace currencies, whose values have become almost worthless and who’s tenure as world currencies have lapsed. An International New Monetary Regime Conference is hereby proposed  for November, 2008 to effect the GLOBAL SWITCHING from the old exchange system to the new financial regime. This will restore confidence in wholesale banking once again.

Through its scary foreign policy, America has cut itself from its leadership role in a globalized world. It should open its shores to international trade under the existing WTO rules and regulations. There are many interlinking questions which have been left unanswered in the field of international trade, environmental laws and economic policy choices and why war should continue to be an instrument of US national policy.

Americans spend a lot of time telling other people what is good for them, so much so, that they have no time to listen to others or themselves. In fact, from my experience, anything that does not tally with the American view-point is either regarded as an affront or viewed with hostility. Indeed, there only two ways, the wrong way and the American way.

 This is perhaps why other nations have learnt from the US and moved past. It is always good to listen to others, even “the dull and ignorant because they too, have their stories”. Perhaps, the affected American banks could have saved themselves the present embarrassment if they had listened to the persistent warnings of some investment bankers and investors in and outside America.

 Prompt interest rate cuts could have ameliorated the situation. The social welfare scheme  will  be put under pressure since nothing is trickling down any more.

The financial plight of some people in America can be improved upon by an inward-looking policy of AMERICA FIRST, world redemption last. The American press seems to report power, but does not speak to power. Could the American press not see the hand-writing on the WALL STREET? All those Rose Garden spineless interviews should give way to what Wolf Blitzer suggests and should be replaced with “tough questions”.

 Many identifiable factors have conspired to wreck havoc on the US economy. Iran is no longer using the dollar as an exchange instrument. Some states in Latin America are threatening the same avoidance. The price of oil is very high. The relations with Russia are worsening. Niger Delta militants are cutting America’s reliable source of oil. China is buying up Iraqi oil. North Korea is back in nuclear business. They tested a rocket recently. Iran’s is on course.

Those who create tensions and murder innocent people should reflect on their actions. How much more pain and mayhem do they intend to inflict on the rest of us before they see the harm they cause?

 Afghanistan needs more troops and money, Pakistan is crying out loud over US incursions into its territory. China, India, Kazakhstan, Uzbekistan are supporting Russia in her stand-off against Georgia. Russian war-ships and planes are now in the Caribbean for war-games. Winter and rough weather will add to the American people’s misery in December, 2008.And now, and this financial crunch!

I have evolved a new ethical concept, which propagates that arrogance is a modest virtue and that modesty died with Gandhi and Martin Luther King jnr.Arrogance challenges one to do bigger things. Modesty reduces one to pious living, which is totally at variance with the go-getting jet age. I will rather run than crawl. This mind-set got me to thinking how I can formulate a strategy for the US Democratic Party, to win the elections in November, 2008.

Mr. Joe Biden has ruefully ruminated over why he should be the Vice President and running mate of Mr. Barack Obama, instead of the deserving lady, Mrs. Hillary Rodham Clinton, who did very well in the primaries. Joe’s misery was plain, a day after his nomination.

Now, this is my winning strategy for the Democrats. I call it the football Coach’s winning strategy in which he recalls a star player and replaces him with a fresh shooter, who then goes and scores the winning goal, in the dying minutes.

On 1^st October, 2008, Mr. Joe Biden may step down, citing “personal reasons”, a diplomatic nicety. Then, in a full stadium in New York City, Hillary Clinton will be declared the new Vice Presidential running mate to Barrack Obama. There will be a deafening applause that will reverberate throughout America and world-wide.

 If this happens, the Republicans will be numb, confused and beat a retreat. You see, my arrogance drove me to send my new book (as it was then) entitled, “Human Rights In International Law” 2^nd edition, 1992, to “Hillary and Bill Clinton” during my one-year teaching engagement at the University of Michigan at Ann Arbor in 1992 . In the autographed book, I wrote, “You will win.”

I was attracted to the intellectual agility of Mrs. Hillary Clinton, after she spoke to the University of Michigan audience for forty-five minutes, extempore. The young law student sitting in front of me was so impressed by the address that she shouted,” Why are not running for President” I responded intuitively, “She will, she will.”

My arrogance has made me into an intercessor and a political soothsayer or better, a seer. My attitude fuelled by arrogance has enabled me throughout my living in the five continents on Planet Earth, to treat with utter contempt any person, who nurtures the notion of racial superiority. I speak and write your language better than you, Johnson. You cannot understand mine. Yet, you were born in Nigeria! What is the difference between the colours of our tongues and our under-foot?

What I am leading up to is that no jaundiced writer should talk about a” Black Monday, week or month,” when referring to the current financial crisis because I do not see how the colour black contributed anything to proven white-collar incompetence.

This soliloquy ended when I read some newspapers that carried frightening headlines as if the end-times for capitalism are here. Capitalism, being a social system, cannot be timeless, unlimited and unchanging. For many hard-working, regular tax-paying, decent American citizens, “expectations have darkened into anxiety and anxiety into hope and hope into despair.”

We are all Americans till January, 2009.If Americans vote for sustainable change and a new beginning, they have my rose-studded congratulations! Should they be carried away by race-consciousness, heroic exploits sentiments and vote to go back to “EGYPT”, then they have my regrets and heartfelt condolences. May better times come to America in January 2009? Can a pious American Christian say, AMEN?

Professor Dr. Emmanuel Omoh Esiemokhai is the Academic Chancellor, Bosas International Law Bureau, Abuja, FCT, Nigeria. A Multi-National ONLY-Turn-Around practitioner consults in Dubai. Esiemokhai serves on the Board of NICON INSURANCE, NIGERIA Plc.

Robot  # 1 | 21.09.2008 17:52

In the 1980s, American TIME magazine devoted an entire edition to evaluate whether capitalism was working. I would request that prestigious media to review the question again, in the light of the...Read the full article.