Do you recognize the one that is taking place, since September 19?
The top five percent in the US, according to the FED 2004, SCF, own:
page 27
...Ownership shares. For some assets, the distributions of the amounts held are far more disproportionate than the differences in ownership rates. MOST STRIKING is the 62.3 percent share of business assets OWNED BY THE WEALTHIEST 1 percent of the wealth distribution in 2004 (table 11a); the NEXT-WEALTHIEST 4 percent OWNED ANOTHER 22.4 percent of the total. Other key items subject to capital gains also show strong disproportions: THE WEALTHIEST 5 PERCENT OF FAMILIES OWNED 61.9 percent of residential real estate other than principal residences, 71.7 percent of nonresidential real estate, and 65.9 PERCENT OF DIRECTLY- AND INDIRECTLY HELD STOCKS. For bonds, 93.7 PERCENT OF THE TOTAL WERE HELD BY THIS GROUP....
...and economist Dr. Hussman asks congress:
Why on earth would Congress put the U.S. public behind these bondholders? ...
If Dr. Hussman is correct, why is the media not describing this bailout DEMAND as an attempted coup in ongoing class warfare?
The results of the 2007 triennial Fed SCF - Study of Consumer Finances, will be kept from public view until after the election. This is from the 2004 Fed SCF:
http://www.federalreserve.gov/...
Currents and Undercurrents: Changes in the Distribution of Wealth, 1989–2004
January 30, 2006
Abstract
This paper considers changes in the distribution of the wealth of U.S. families over the 1989–2004 period using data from the Survey of Consumer Finances (SCF). Real net worth grew broadly over this period. At the same time, there are indications that wealth became more concentrated, but the result does not hold unambiguously across a set of plausible measures. For example, the Gini coefficient shows significant increases in the concentration of wealth from 1989 to 2004, but the wealth share of the wealthiest one percent of families did not change significantly. Graphical analysis suggests that there was a shift in favor of the top of the distribution, while for the broad middle of the distribution increases were about in proportion to earlier wealth. Within this period, there are other interesting patterns. For example, from 1992 to 2004 the wealth share of the least wealthy half of the population fell significantly to 2.5 percent of total wealth....
page 27
...Ownership shares. For some assets, the distributions of the amounts held are far more disproportionate than the differences in ownership rates. MOST STRIKING is the 62.3 percent share of business assets OWNED BY THE WEALTHIEST 1 percent of the wealth distribution in 2004 (table 11a); the NEXT-WEALTHIEST 4 percent OWNED ANOTHER 22.4 percent of the total. Other key items subject to capital gains also show strong disproportions: THE WEALTHIEST 5 PERCENT OF FAMILIES OWNED 61.9 percent of residential real estate other than principal residences, 71.7 percent of nonresidential real estate, and 65.9 PERCENT OF DIRECTLY- AND INDIRECTLY HELD STOCKS. For bonds, 93.7 PERCENT OF THE TOTAL WERE HELD BY THIS GROUP....
http://hussmanfunds.com/...
September 22, 2008
An Open Letter to the U.S. Congress Regarding the Current Financial Crisis
John P. Hussman, Ph.D.
In 2006, the president of the Federal Reserve Bank of St. Louis noted "Everyone knows that a policy of bailouts will increase their number." This week, Congress is being asked to hastily consider a monstrous bailout plan on a scale nearly equivalent to the existing balance sheet of the Federal Reserve.
As an economist and investment manager, I am concerned that the plan advocated by Treasury is essentially a plan to bail out the bondholders of financial institutions that made bad lending decisions, with little help to homeowners that are actually in financial distress. It is difficult to believe that the U.S. government is contemplating taking on the bad assets of these institutions at probable taxpayer loss and effectively immunizing the bondholders (and shareholders) of these companies. ....
....TOTAL LIABILITIES AND EQUITY: $100
Now, as these bad assets get written off, shareholder equity is also reduced. What has happened in recent months is that this equity has become insufficient, so that the company technically becomes insolvent provided that the bondholders have to be paid off:
Good assets: $95
Assets gone bad (written off): $0
TOTAL ASSETS: $95
Liabilities to customers/counterparties: $80
Debt to bondholders of company: $17
Shareholder equity: ($2)
TOTAL LIABILITIES AND EQUITY: $95
These institutions are not failing because 95% of the assets have gone bad. They are failing because 5% of the assets have gone bad and they over-stretched their capital. At the heart of the problem is "gross leverage" – the ratio of total assets taken on by the company to its shareholder equity. The sequence of failures we've observed in recent months, starting with Bear Stearns, has followed almost exactly in order of their gross leverage multiples. After Bear Stearns, Fannie Mae, and Freddie Mac went into crisis, Lehman and Merrill Lynch followed. Morgan Stanley, and Hank Paulson's former employer, Goldman Sachs, remain the most leveraged companies on Wall Street, with gross leverage multiples above 20.
Look at the insolvent balance sheet again. The appropriate solution is not for the government to replace the bad assets with public money, but rather for the government to execute a receivership of the failed institution and immediately conduct a "whole bank" sale – selling the bank's assets and liabilities as a package, but ex the debt to bondholders, which preserves the ongoing business without loss to customers and counterparties, wipes out shareholder equity, and gives bondholders partial (perhaps even nearly complete) recovery with the proceeds.
The key is to recognize that for nearly all of the institutions currently at risk of failure, there exists a cushion of bondholder capital sufficient to absorb all probable losses, without any need for the public to bear the cost.
For example, consider Morgan Stanley's balance sheet as of 8/31/08. Total assets were $988.8 billion, with shareholder equity (including junior subordinated debt) of $42.1 billion, for a gross leverage ratio of 23.5. However, the company also has approximately $200 billion in long-term debt to its bondholders, primarily consisting of senior debt with an average maturity of about 6 years. Why on earth would Congress put the U.S. public behind these bondholders? ...