Pirates are all the rage these days. The brazen audacity of Somali Pirates seems to make headlines every other day. Not only does crime pay, it pays lavishly; over $15 billion a year by some estimates. Traditionally, a Pirate is someone who robs or plunders on the high seas. The most successful or notorious villains in history passed into folklore.
Blackbeard, Captain Morgan and Calico Jack come to mind. Even girls could be Pirates. Ann Bonny and Mary Read, for example. And it seems there have always been Pirates. Over 2,500 years ago, Pirates were already stalking the Aegean.
The romantic Golden Era of piracy, which lasted for hundreds of years, from the mid 16th to the late 19th centuries, was centered in the Caribbean but virtually all bodies of water navigated by commercial shipping were afflicted. There were even Russian Pirates. The Ushkuiniks were some of the most blood thirsty and feared Pirates in history. Based in the Old Russian Republic of Novgorod, they took their name from the thin snake-like boats they sailed swiftly and stealthily up and down the Volga River. Records of devastating Ushkunik raids date from the10th century, but it wasn’t until the 14th century that they evolved into well-organized bands of cutthroats.
In their hay-day, they were hired by elite Novgorodian families to intimidate and terrorize rival clans. But like most Pirates, the Ushkuniks spent the majority of their time drinking, pillaging, killing and burning villages at random, mostly for fun and profit. But eventually, even the Ushkuniks fell apart, as Moscow grew stronger and imposed her idea of order on the area.
Modern language has expanded the meaning of the word ‘Pirate’ to include almost anyone who plagiarizes, plunders or underhandedly steals property. And by that definition, anyone who wants to meet really terrible black-hearted modern day Pirates can probably just walk into the nearest Bank.
Washington insiders are already leaking the results of the major bank’s “stress tests”. Neither ‘stressful’ nor ‘tests’ by any meaningful sense of those words, the bottom line results seems to be that even the largest banks will need to raise billions in order to ride out some uncertain period of uncertainty. Yes, it makes no sense. And to make an unclear situation eve more obscure, the numbers simply don’t add up.
Take Citibank for example. A behemoth with nearly $2 trillion in capitalization, Citi saw its market cap decimated over the last year. And just yesterday, we were told that a paltry $5 billion in cash would make everything right at Citi. In fact, according to the latest reports a mere $75 billion, less than a tenth of the entire TARP, will make the whole US banking system suddenly sound. Things have turned around so dramatically in the last few months that many Banks, like Goldman Sachs and JP Morgan are fairly chomping at the bit to pay the US Treasury back. Who was that silly stranger talking about a global melt down anyway?
To be sure, things do look like they’re bottoming out. Albeit after trillions of US taxpayer dollars, job losses and real estate prices do seem to be stabilizing. Consumers seem to be spending a bit more and foreclosure rates are ebbing. And even if the entire American auto industry is insolvent, at least the Banks aren’t in anywhere near as bad a shape as fear made it. Amazing! ‘Too good to be true’ some folks are even saying. Perhaps, but even if it is true, at least two powerful questions remain. What exactly happened and were did all the money go?
Anyone who blames the global economic downturn on over reaching homeowners or bad consumer credit is either gullible or lying. To sum it all up in a short paragraph: Huge multinational companies, like Goldman Sachs, AIG, Bank of America and Citibank made trillion-dollar bets with each other and with hundreds of hedge funds all around the World. They bet on exotic instruments like credit default swaps and financial derivatives. This was made irresistibly possible because the entire asset class was quietly but deliberately deregulated in the waning days of the Clinton administration. And it looked like free money.
But after eight years of the Bush Administration tilting at Muslim windmills and utterly failing to recognize the danger, the house of cards came crashing down. Rich people who owned these companies suddenly found out to their abject horror that they had lost all their money. But they still had influence. So they scared the Be-Jesus out of everyone and in the panic, transferred their losses onto the taxpayers. The foul deed done, they’re now trying to quietly slither back into the darkness and resume all their old bad habits. As of this writing, it looks like the Obama Administration is doing nothing so much as holding the doors open for them. Now if that’s not Piracy, the only difference is the boat.
Dominick L Auci, Ph.D.