Keep the heat on Congress!

Commentary by the editor of Fight Back!

A Fight Back! Editorial

Worst Financial Crisis Since the Great Depression

San Jose, CA – The year-old financial crisis entered a new stage in September as the U.S. financial system suffered its worst setbacks since the Great Depression of the 1930s. Over the weekend of Sept. 6-7, Fannie Mae and Freddie Mac, two large mortgage companies that were financing three-quarters of U.S. mortgages, were taken over by the government due to their growing mortgage losses. Then a week later the 158-year old investment bank Lehman Brothers failed to find a buyer and had to declare bankruptcy. The following Tuesday, Sept. 16, the giant insurance firm American International Group (AIG), with more than $1 trillion (1,000 billion) in assets, failed to get an emergency loan and was taken over by U.S. government in exchange for an $85 billion dollar loan. The next day the Putnam money market fund had to close down as investors pulled billions of dollars out following a big loss at a smaller money market fund that had made a big loan to Lehman Brothers.

San Jose, CA – On Sept. 5 the Labor Department reported that the unemployment rate in August rose to 6.1%, from 5.7% in July. This is the highest unemployment rate in almost five years. A week earlier a report from the Commerce Department showed that real income (income adjusted for inflation) fell in July for the first time since January, dragging down household spending despite a drop in savings for the month. These two reports show that the economy may be going into a downward spiral of falling income and spending, leading to more layoffs, which in turn cut incomes and then spending even more.

Plainfield, NJ – The fight here to save Muhlenberg Hospital continues to intensify and broaden. Two public hearings of the New Jersey Health Planning Commission, on May 5 and on June 5, each drew more than 1200 people. The Commission must grant a Certificate of Need (CN) to legally allow Solaris Health Care Corporation to close the hospital.

San José, CA – Working people had less to celebrate over the holiday weekend as the number of jobs fell for the sixth month in a row in June. On July 3, the U.S. Department of Labor reported that there were 62,000 fewer jobs in June as compared to May and increased their estimates of job losses for previous months. All told, businesses have shed almost one-half a million jobs since January. Six straight months of job losses has always meant a recession is underway in the past. At the same time, the number of people applying for unemployment benefits jumped to more than 400,000, a level typical of a recession.

Trenton, NJ – 500 people traveled to Trenton, the state capital of New Jersey, April 5, to protest the threat to close Muhlenberg Hospital in Plainfield. Hospital closings are at crisis level in New Jersey and Muhlenberg, which has served Plainfield for 125 years, is only the latest to be threatened.

Federal Reserve Uses Emergency Powers from the Great Depression of the 1930s

San José, CA – On Friday, March 14, the fifth largest investment bank in the United States, Bear Stearns, failed. Over the weekend the Federal Reserve took over the riskiest mortgage-related investments worth $30 billion and arranged for J.P. Morgan Chase, the third largest U.S. bank (after Citigroup and Bank of America), to buy the rest of Bear Stearns for $2 a share, or 4% of its price on Thursday. The failure of Bear Stearns brings the growing financial crisis full circle, as it was the failure of two Bear Stearns hedge funds that invested in home mortgages that marked the beginning of the crisis last August.

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