Millions of Americans are declaring financial sustainability, even if they don’t exactly call it that. After all, we can’t borrow our way out of debt.

We’re paying down or paying off credit cards. We’re getting rid of our mortgage or putting an extra payment toward the principal balance (which has huge cost savings advantages). Or we’re practicing other frugality rules. According to data from the Federal Reserve, the amount Americans owe on consumer loans and credit cards plummeted $21.6 billion in July of 2009 – the largest monthly drop in consumer debt since the Federal Reserve started to track it in 1943. The “cash for clunkers” will, no doubt, alter the outcomes for August and September, but the trend continues to be less appetite for debt, not more.

People are working to get the bankers out of our lives, demanding that we become someone other than a “consumer.” So while the Federal government continues to re-affirm their “wise” decisions to bailout bankers and big finance, Americans are choosing to fire their credit card companies and break their “death pledge” (aka mortgage) by paying it off early. Of course, there are also many Americans who are in so far over their heads that unfortunately, personal bankruptcy and home foreclosure are the only remedy.

I am, however, focusing on those who thrive in abundance, simplicity and sustainability when it comes to community, lifestyle and, yes, financial intelligence. As my wife and I write about in ECOpreneuring, you cannot have ecological sustainability without a large degree of social and economic equity. The ECOnomy is not about “free trade” but fair trade; it’s about commerce that restores the planet, not destroys it or exploits people.

You can join these financial freedom-seekers too, by practicing financial sustainability. As most of us intuitively recognize, the best things in life are free (or close to it).

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Economist, James Galbraith, on bank stress tests

The results of bank stress tests released this week, do not bear good news. The bottom line is that at  total of $75 billion needs to be raised from 10 major banks to prop them up for losses that could come from a deepening recession.

Here is a Top 4 summary of who needs what in the next six months:

• Bank of America (BAC) will have to raise $33.9 billion;
• Wells Fargo (WFC), $13.7 billion;
• GMAC (GJM), $11.5 billion; and
• Citigroup (C), $5.5 billion

The question people are asking is whether this is the worst news yet? Or whether it is news that the worst is over?

There is no easy answer. The truth is that if unemployment continues to rise, housing prices continue to fall and the economy continues to shrink, then much more money might be needed as problem bank loans could be on the rise.

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Even for a group focused on Investing First and Green Second, this is getting a little silly.

The longer I am here at the Wall Street Green Trading Summit, the less this feels like anything to do with environmentalism.  At some point, when does off-setting stop being feasible, and when does carbon reduction become the name of the game?

>> More Wall Street Green Trading Summit:   Opening, Carbon Markets, Solar Panels and the Electric Grid

This was driven home to me by a presentation on the investment opportunities presented by species banks.  Now, I didn’t even know what a species bank was until today, but apparently you can purchase an offset credit to get around the fact that your company is destroying the natural habitat of an endangered species.  And, there is an entire market based around this principle.

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Laurence Summers—head of the National Economic Council—responded to criticism of the Geithner Plan, “I don’t know of any economist who doesn’t believe that functioning capital markets in which assists can be traded are a good idea.” Economist Paul Krugman responded (NYT) saying that if Summers believe that bribing traders to participate is “better functioning” then Summers should get out more. Many economists believe that this plan could be disastrous.

The Plan would auction bad mortgages held by banks. The government would join the highest bidder with an equal purchase and provide a loan to the bidder up to 85% of the bid. The loan is supposed to provide leverage such that small upward movements will bring large gains to the speculator. According to Summers and Geithner, such auctions will determine their “fair” market value.

Of course small movements downward will bring loss to the speculator as well as the taxpayer, but the speculator can count on the government to do all it can to jack up home prices. Many economist, financers, and bankers have found the Plan disastrous.

Paul Krugman, Nobel Prize-winning (2008) economist, challenges the notion that such an auction will determine fair value as “market mystique.” He analyzes the arithmetic of the Plan and shows that it’s just another attempt to subsidize the real estate industry and mortgage bankers.

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The banks have been paid after all as have massive bonuses for the very AIG employees that dragged the company down. All this with bailout money!

After all of the hullabaloo, AIG  paid $93 billion, more than half of what it has received in bailout cash, to Goldman Sachs Group Inc and a host of European banks. The money went to banks to cover their losses on complex mortgage investments, as well as for collateral needed for other transactions. This is in addition to its plan to pay $165 million in employees bonuses funded by bailout dollars.

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Watch the speech that President Obama delivered to the nation last night. (MSNBC)

President Barack Obama gathered politicians and the public last night to talk about how to avert the worst economic disaster in since the depression through his plan to improve health care, schools and the environment.

The president recognized the enormous impact of the recession and pledged to rebuild the United States of America  to emerge stronger than before.

Here is what he said about the main issues on the American Recovery and Reinvestment Act which has recently become law.

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As ‘nationalization‘ appears to be the U.S. government’s answer to saving the banking industry, the banks themselves are doing all that they can to boost shareholder confidence.

The latest news from Citibank is that they have approached the US government to agree on a new capital injection that would increase their stake in the troubled bank to about 40 per cent but prevent an outright nationalization.

According to this morning’s FT the U.S. government has a strong preference for supporting banks in private markets wherever possible because of the potential international disruption that could ensue if a large global bank fails. But Treasury did not rule out nationalization in all circumstances. The situation is obviously unlike that of Lehman Brothers which the authorities were quite willing to let falter despite international implications.

The move would allow Citigroup to write off some of its existing debt and raise the amount of common stock. While this could translate to happier investors on one hand (because of a larger portion of common stock requirement when details of the new stress test are announced this week), it would also dilute existing Citigroup stockholders significantly.

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How To Finance A Green Business by Leah Edwards is an excellent post that covers four potential sources of cash for green businesses: SBA loans, social-venture venture capital funds, Friends-and-Family financing and partnering with a nonprofit organization.

Recently, Leah also posted about Financing for Energy Efficiency Improvements. In that discussion she talked about how some private banks are starting to offer “green loans” for the financing of clean energy systems or energy efficiency improvements. These same banks may offer small business loans for green businesses. Community banks often favor green loans so after you read the post, if it seems like an option check with your community bank.

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Rainforest Action Network has declared yesterday and today, November 15th, as national days of protest against Citibank and Bank of America for their consistent support of the coal industry and its impact on global warming.

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Many have questioned U.S. Treasury Secretary Hank Paulson’s decision to let Lehman Brothers fail. Christine Lagarde, French finance minister, claimed that the decision was “horrendous.” This has been echoed by many other European policy makers and investors who blame the decision on ideology, claiming that Paulson refused to offer aid to avoid accusations of moral hazard.

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