WHERE HAVE WE BEEN, WHERE ARE WE HEADED?
By: Hope Wilkos, Writer/Blogger Photographer: George Whylie Videographer: Maxine NolanThis has proved to be a very busy week around the world.
The week opened with a glimmer of hope as the New Democracy Party declared victory in the Greek election. That only marks the beginning and more must be done to get the country back on the road to recovery.
Coming on the heels of that win and to try and stimulate the U.S. economy in an indirect way, the Federal Reserve announced their continuation of “Operation Twist”. This plan extends a total of $267 billion of bond swapping meant to encourage banks into lending or in simpler terms, shorter-term securities will be replaced with longer term bonds. This initiative was originally set to expire at the end of this month but now it will be in effect until the end of this year. The Government is viewing this in a very positive and hopeful light.
Just as the U.S. was digesting what seemed like the proper solution to a suffering economy, the House Oversight Committee earlier this week recommended that Attorney General Eric Holder be cited for contempt and called for his resignation. This was due mostly in part to his role in “Operation Fast and Furious”, a gun smuggling scandal that resulted in the murder of Border Patrol Agent Brian Terry on December 15, 2010. There has never been a time that a U.S. Attorney General has been held in contempt of court so the final outcome should be interesting.
You may ask what is “Operation Fast and Furious”? Early on in Obama’s term, this was a theory that guns were allowed to be purchased from U.S. shops and they fell into the hands of Mexican drug gangs. President Obama has claimed executive privilege to protect the documents that are connected to this operation. Holder’s Justice Department says that a letter was sent out and every effort was made to interdict guns before they were handed off to the wrong party. Basically, they had no knowledge of this wrongful act.
This is most likely only the beginning of a long and tenacious investigation.
The biggest blow of the week took place on Thursday. A total of fifteen of the world’s largest banks were downgraded. The majority were given warnings in February. This unfolding circumstance could work against the Fed’s efforts with “Operation Twist”. Banks may hike up fees, they may be reluctant to lend money and this creates a ripple effect in the economy. Fees that banks charge may increase and new fees could be charged.
Ratings are assigned on a scale that determines the ability of the entities to pay down the debt. Banks will now be forced to set aside billions of dollars in reserves because the insured debt becomes that much more risky. It may become even more difficult to get a mortgage loan or a car loan or the cost of a credit line. This will not only apply to individuals but also to small businesses. Goldman Sachs, Morgan Stanley, JPMorgan Chase, Bank of America and Citigroup are all part of the credit rating downgrade. Other banks include Barclay’s, HSBC and Royal Bank of Scotland.
This only proves that much more work must be undertaken to try and turn around the economy not only here at home but also abroad.
PHOTO CREDITS: Zimbio, Reuters
