One of the most commonly referenced internet scams is the Nigerian 419 Scam, which gets its name from the Nigerian Criminal Code dealing with fraud. The Nigerian 419 Scam preys on people who are too greedy to read the warning signs around them. These scams are a close parallel to the fraud that has been occurring for the last few years in the US, and are coming to a head in the Financial Crisis of 2008.
A New Kind of Fraud – The American 419 Scam
Our country is in the middle of an economic crisis and it is the result of a massive series of confidence jobs that have taken place over the last few years. Systematic bending and breaking of financial regulations and best practices has brought our economy to its knees. Why? Greed and a lack of ethics on the part of lenders, brokers, consumers, bankers, and more. Yes, there are millions of innocent people. But the actions of a few bad apples are threatening to ruin the bushel – and we, the tax paying American public, are left footing the bill.
So what is the American 419 Scam? Borrow, borrow, borrow. Then claim the economy will fail because you can’t pay back your loans. If you’re lucky, the US Government will come along and bail you out.
The financial crisis of 2008
Greed and fraud have affected nearly every aspect of the American financial industry:
Banks and financial institutions. In recent months, several US banks crashed, including IndyMac and Washington Mutual – the largest bank failure in US history. Several other US banks or major players in the US financial industry have announced massive losses or were assumed by other banks – Bank Of America To Buy Merrill Lynch For $50 Billion.
Real estate. The real estate market has been hit particularly hard. Since 2006, 286 major mortgage lending institutions have either shut down completely, or temporarily closed their doors to new mortgage loans. Most recently Freddie Mac and Fannie Mae were assumed by the US government.
Insurance companies. The federal government made an $85 Billion bail out of AIG, one of the largest insurance companies in the US. The government bail out gave the government an ownership stake in the company.
Stock markets. The stock markets have been a roller coaster this week, and I imagine it will continue in the near future. In an effort to shore up stock prices, the SEC placed a temporary ban on short selling stocks. The majority of my investments are in retirement accounts, and I don’t trade individual stocks. But this affects thousands of people who trade for a living, and probably ended up hurting hundreds, if not thousands, of individual and professional traders.
FBI Investigations. The problem has escalated to the point of an FBI investigation of 26 companies and their leadership, including mortgage companies Fannie Mae and Freddie Mac, insurer American International Group Inc, and Lehman Brothers Holdings Inc.
The government’s answer? Throw more money at the problem.
A proposed $700 Billion government bail out – that could rise to over $1.8 TRILLION. The government is discussing a $700 Billion bail out to help stabilize our fragile economy. The $700B is earmarked for buying bad mortgages and other assets from struggling institutions. The government has several other proposals on the books and the final tally could run as high as $1.8 trillion.
Here is the Fact Sheet for the proposed bail out, as published by the Department of the Treasury: FACT SHEET: Proposed Treasury Authority to Purchase Troubled Assets. The fact sheet is light on details, but I’m sure they will get hammered out before anything is approved.
The American public was systematically scammed
…and now we, the American taxpayers, have to pay the price. I don’t like the idea of a $700 Billion bail out, and I especially don’t like the idea of a $1.8 Trillion bail out. It doesn’t seem right for our government to make good on the systematic fraud committed by thousands of individuals and companies.
But I don’t have the answers to the problems that face our economy and I don’t know what the long term ramifications will be both here and abroad. How long will it take our country’s economy to recover if we proceed with the $700B bail out? How long will it take if we don’t? What happens to the world economy? I don’t have the answers, but I know this: The American people will survive, and so will our economy.
The American economy will survive
Though it may not seem that way at the moment, America is still the proverbial land of opportunity. If one looks at our history, one will see that we have weathered major periods of financial difficulty before, particularly The Great Depression and the period of stagflation in the late 70’s/early 80’s. Though the Great Depression and the period of Stagflation were difficult for our country, the periods following the Great Depression and stagflation were generally considered prosperous. The stock markets have had their ups and downs, and major companies have folded and others have grown to take their place. Through it all, America has always prevailed.
The American economy is in a difficult place right now, but there are things everyone can do do improve his or her situation.
Do your part. The best thing that you and I can do is pay attention to what is going on and prepare for anything. If you do not agree with the bailout, you can contact your senator and voice your opinion. Are you worried about banks failing? Learn what happens if your bank fails. Pay your bills on time, look for more ways to earn money, invest wisely, etc.
Vote. The General Elections will happen in less than 2 months. I imagine the current state of the economy will be one of the most heavily debated topics preceding the election, though both parties are wisely playing “wait and see” right now. The results of this year’s election will go a long way toward shaping the American economy for years to come.
Here are some contemporary views on the financial crisis of 2008.
- Thoughts on the Financial Crisis from an Actual Economist.
- What Caused The Financial Crisis Of 2008?.
- Should We Let The Greedy Bastards Fail?.
- Me too, Secretary Paulson!.
- Your Urgent Help Needed.
- Just Received A Nigerian Scam Email From Treasury Minister Henry Paulson.