Will Unregulated Wall Street Casino Gamblers Force Struggling American Workers To "Take it on the Chin" Again?
From Nelson D. Schwartz at the NYTimes: "When the Mayans envisioned the world coming to an end in 2012 — at least in the Hollywood telling — they didn’t count junk bonds among the perils that would lead to worldwide disaster.
"Maybe they should have, because 2012 also is the beginning of a three-year period in which more than $700 billion in risky, high-yield corporate debt begins to come due, an extraordinary surge that some analysts fear could overload the debt markets.
"With huge bills about to hit corporations and the federal government around the same time, the worry is that some companies will have trouble getting new loans, spurring defaults and a wave of bankruptcies.
"Sovereign debt aside, the approaching scramble for corporate financing could strain the broader economy as jobs are cut, consumer spending is scaled back and credit is tightened for both consumers and businesses.
"Even Moody’s, which is known for its sober public statements, is sounding the alarm.
“ 'An avalanche is brewing in 2012 and beyond if companies don’t get out in front of this,' said Kevin Cassidy, a senior credit officer at Moody’s.
"As was the case with the collapse of the subprime mortgage market three years ago, derivatives played a big role in the explosion of risky corporate debt. In this case the culprit was a financial instrument called a collateralized loan obligation, which helped issuers repackage corporate loans much as subprime mortgages were sliced, diced and then resold to other investors. That made many more risky loans available."
And these risky financial casino tools are still not regulated.
The article continues: "The period from 2012 to 2014 represents payback time for a Who’s Who of private equity firms and the now highly leveraged companies they helped buy in the precrisis boom years.
"The biggest include the hospital owner HCA, which was taken private in 2006 by a group led by Bain Capital and Kohlberg Kravis & Roberts for $33 billion, and has $13.3 billion in debt payments coming due between 2012 and 2014. Another buyout led by Kohlberg Kravis, for the giant Texas utility TXU, has $20.9 billion that needs to be refinanced in the same period."
As Jonathan Tasini at Working Life warns: "And who do we think will be asked to assume the burden of the leveraged buyouts and gambling-gone-bad? The workers. Because of companies can't get new loans, the first thing that will happen is a wave of severe cuts in wages--on a population that already has not seen real wage hikes in decades, compared to productivity.
"The talk of recovery is not dealing with the real world of people."
Categories: Financial Crisis
Tags: Barack Obama Obama Administration Financial Crisis Bushites Labor
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