I Get By With A Little Help From My Friends

It appears our Galtian Overlords really can’t do anything right:

“When you see the dollars the banks got, it’s hard to make the case these were successful institutions,” says Sherrod Brown, a Democratic Senator from Ohio who in 2010 introduced an unsuccessful bill to limit bank size. “This is an issue that can unite the Tea Party and Occupy Wall Street. There are lawmakers in both parties who would change their votes now.”

The size of the bailout came to light after Bloomberg LP, the parent of Bloomberg News, won a court case against the Fed and a group of the biggest U.S. banks called Clearing House Association LLC to force lending details into the open.

The Fed, headed by Chairman Ben S. Bernanke, argued that revealing borrower details would create a stigma — investors and counterparties would shun firms that used the central bank as lender of last resort — and that needy institutions would be reluctant to borrow in the next crisis. Clearing House Association fought Bloomberg’s lawsuit up to the U.S. Supreme Court, which declined to hear the banks’ appeal in March 2011.

The amount of money the central bank parceled out was surprising even to Gary H. Stern, president of the Federal Reserve Bank of Minneapolis from 1985 to 2009, who says he “wasn’t aware of the magnitude.” It dwarfed the Treasury Department’s better-known $700 billion Troubled Asset Relief Program, or TARP. Add up guarantees and lending limits, and the Fed had committed $7.77 trillion as of March 2009 to rescuing the financial system, more than half the value of everything produced in the U.S. that year.

Remember what was happening in March of 2009? On February 19th, 2009, Rick Santelli had his famous rant about a program to extend meager amounts of help to homeowners, while at the very same time the Fed was doling out trillions to his douchebag buddies. While these assholes were famously whining and screaming about socialism and government involvement in the markets (when people were discussing different compensation rules), they were behind the scenes taking trillions to help smooth over their fuck-ups.

This is what the useful idiots in the tea party are fighting for…

159 replies
  1. 1
    cathyx says:

    And then shell out huge bonuses for jobs well done.

  2. 2
    lamh35 says:

    Is this real? Barney Frank not seeking re-election?

    http://content.usatoday.com/co.....titialskip

  3. 3
    schrodinger's cat says:

    I am not defending what the Fed did but was not rescuing the financial system an option? If we had let all the banks fail, the magnitude of the resulting economic crisis would have been much worse than what were are facing right now. It would have been like Great Depression II on steriods.

    What was needed after the bailout was stricter regulations and more transparency, and that has yet to happen.

    ETA: The banks know that they will be rescued, so they keep making riskier bets because they know that the lender of last resort, i.e. the Fed will not let them fail.

  4. 4
    ant says:

    WRONG COLE!!!! WRONG COLE!!!! WRONG COLE!!!! WRONG COLE!!!!

    (runs around screaming)

  5. 5
    General Stuck says:

    What a fucked up country.

    And then there is, “Hey wingnut, how green is your warpig’?

    We are living a series of recurring Monty Python scripts, produced by the GOP and starring all republicans, and more than a few democrats. We need something completely different.

  6. 6
    Tone In DC says:

    Thanks for this, John.
    7.77 trillion dollars. The movie “Inside Job” doesn’t do those thieves justice.

  7. 7
    smintheus says:

    And as Bloomberg highlights, once the hollowed-out megabanks had been propped up with hundreds of billions in free loans from the Fed, they spent lavishly on lobbying to kill meaningful banking reform…arguing it was an attempt to ‘punish success’. And the teabaggers sided not with the reformers but with the banks.

  8. 8
    schrodinger's cat says:

    @Tone In DC: Well and nothing has changed, so this will happen again, only question is when.

  9. 9
    General Stuck says:

    This is what the useful idiots in the tea party are fighting for…

    To be fair, they are also fighting for, to get their country back. And from the look of things, maybe we should just give it to them, and move to Canada.

  10. 10
    smintheus says:

    @schrodinger’s cat: Is that true? The bankers and their waterboys were claiming in fall of 2008 that if nothing were done to rescue the banks, then unemployment would rise to 8 or even 9 percent. So we’ve achieved what by directing a big money cannon at them?

    What happens when banks collapse is that their assets are gobbled up and reconstituted or concentrated in new/other banks that are stable. If the gov’t had let things run their course, we might have seen an ugly year or two, and then a steep climb back out of recession. Instead we have weak banks struggling along and an economy that’s going nowhere…until the next financial disaster strikes.

    On top of that, the banks are bigger and more convinced than ever that they can privatize profits and socialize risk.

  11. 11
    wilfred says:

    As I recall, you were a big defender of the bailout, no? Wasn’t it all necessary to save the country from the worst possible imaginary absolute end to life as we know it?

    Oh well, it’s only money.

  12. 12
    some guy says:

    Geithner Rules, Bernanke Drools.

    this is the world we live in now. maybe we could all pitch in and rent a tumbrel for Barney Frank to exit his press conference in?

  13. 13
    daveNYC says:

    @schrodinger’s cat:

    I am not defending what the Fed did but was not rescuing the financial system an option? If we had let all the banks fail, the magnitude of the resulting economic crisis would have been much worse than what were are facing right now. It would have been like Great Depression II on steriods.

    There were other options for maintaining the financial sector that didn’t involve basically giving the existing banks a blank check.

    Many people were advocating for a Swedish style solution. None of those people were in a position to put that into practice though.

  14. 14
    kindness says:

    And yet the Fed still acts as if it’s only job is to keep inflation low. That second responsibility of keeping American’s employed? Well, who knew Rick Perry was smarter than the Fed? At least Rick could remember two things at once.

  15. 15
    some guy says:

    If we had let all the banks fail, the magnitude of the resulting economic crisis would have been much worse than what were are facing right now. It would have been like Great Depression II on steriods.

    this is the #1 Myth used to propagate all the other Big Lies capital has used to enrich themselves for the last 4 years.

    Banks are not magical creations, they are capital formations. Let them fail and rebuild from the ashes.

  16. 16
    Bago says:

    A stigma. Is that in any way comparable to a moral hazard?

  17. 17
    schrodinger's cat says:

    @daveNYC: I am not saying that the way it was the done, was the best or the only way to rescue the financial sector. Liquidity (free flow of credit) had to be restored, the economy cannot function without liquidity.

  18. 18
    Scott Supak says:

    To top this off, the fed is currently paying .25% interest on reserves, when the law says they’re supposed to get paid the prevailing short term interest rate, which is much lower than .25%. And that might even be illegal, but no one is doing shit about that.

    “We are living in an interminable succession of absurdities imposed by the myopic logic of short-term thinking.”—Jacques-Yves Cousteau

  19. 19
    cat says:

    You know what else was happening in 2009 till today when the fed released the numbers? Everyone claiming the bank bailout was closer to $8 trillion not the $1.4 trillion the fed publically climaed was riduculed as being wrong.

    But we’ll just pretend that didnt happen.

  20. 20
    wilfred says:

    “There were other options for maintaining the financial sector that didn’t involve basically giving the existing banks a blank check.”

    Oh, for the rhetoric from those days! The staccato full stops: We. Have. No. Other. Option.

    Great stuff. So what if we got robbed. Some people were just so right about the whole think.

  21. 21
    schrodinger's cat says:

    @kindness: Inflation is very low. The Fed and even the Obama administration is fairly economically conservative. Keeping inflation low has been the dogma from the late 70’s. If you are interest is more technical google the Philips Curve trade-off.

  22. 22
    General Stuck says:

    Lehman Brothers going under nearly brought the entire shit down, the bigger banks plus AIG would have certainly created a world epic disaster, not to mention the US losing a large chunk of it’s auto manufacturing without bailing out General Motors.

    That is not to say, that the profiteers and greed merchants didn’t come out better than they needed to, and the system wasn’t reformed like it needed to be. It’s still not to late to do what is necessary, but we need a bunch more Sherrod Brown’s and Bernie Sanders for the votes in congress to make it happen.

  23. 23
    Sentient Puddle says:

    @daveNYC:

    There were other options for maintaining the financial sector that didn’t involve basically giving the existing banks a blank check.
    __
    Many people were advocating for a Swedish style solution.

    What is this, more specifically?

  24. 24
    Threadkiller says:

    @cat: Yeah, but Taibbi says “fuck” a lot. So there.

    Technically true but collectively nonsense, also too.

  25. 25
    AlladinsLamp says:

    What you’re looking at here are three lines. The black line is Morgan Stanley’s market capitalization, which tends to hover in the $40 billion range but which fell as low as $9.8 billion in November 2008. The orange line is the amount that Morgan Stanley owed to the Federal Reserve on any given day — an amount which peaked at $107 billion on September 29, 2008. And the red line is the ratio between the two: Morgan Stanley’s debt to the Federal Reserve, expressed as a percentage of its market value. That ratio, it turns out, peaked at some point in October, at somewhere north of 750%.

    http://blogs.reuters.com/felix.....t-edition/

  26. 26
    bin Lurkin' says:

    @cat:

    Everyone claiming the bank bailout was closer to $8 trillion not the $1.4 trillion the fed publically climaed was riduculed as being wrong.
    ..
    But we’ll just pretend that didnt happen.

    Shrill people are shrill.

  27. 27
    Threadkiller says:

    @Sentient Puddle: Swedish solution – basically nationalizing the failing banks. Take them into receivership and salvage what you can.

    The equity holders largely get wiped out when the losses are marked. As it should be, markets and creative destruction and all.

  28. 28
    wilfred says:

    Wait a minute. Doesn’t the fact that we gave the banks so much more mean we’ll get even more back when they pay it back with all the interest and then we can give them more of the old money and it will spout even more interest back like greenback waterfalls forever in the eternal green light?

    It’s all good. Again.

  29. 29
    Tone In DC says:

    OT: Greeks to protest austerity measures.

    http://www.huffingtonpost.com/.....07848.html

  30. 30
    FlipYrWhig says:

    I think They should have done The Right Things! Not the wrong ones, which I warned you would be wrong! Even a fool could have seen that the right things would be better than the wrong ones! Oh, such is life, for me always to bear the burden of having been both totally right and totally unappreciated.

  31. 31
    Ken says:

    @Sentient Puddle: I dunno what the Swedish solution is, but I’ve seen Gingrich advocating for a Chinese style solution(1), which I think means shooting all the executives at all the corporations that needed bailouts and billing their families for the bullet.

    1. At least, he advocates the Chinese system of capital gains tax, environmental safeguards, and labor relations (respectively: none, none, and see previous note about the bill for the bullet), so I assume he also approves of the Chinese approach to management.

  32. 32
    geg6 says:

    @daveNYC:

    Many people were advocating for a Swedish style solution. None of those people were in a position to put that into practice though.

    This. This is what I remember a lot of people discussing, perhaps even myself included.

  33. 33
    MikeZ says:

    Words can’t describe how fucked up this is.

  34. 34
    schrodinger's cat says:

    @Ken: Should we also have Chinese style solutions for failed leaders?

  35. 35
    Villago Delenda Est says:

    As John indicated, while the institutions failing may not have been good, the individuals responsible for the failing institutions got off not only scot free, but profited from the fail.

    This is moral hazard if I ever heard of a hazard. These assholes (and their families) need to be impoverished as punishment for their actions. No hiding of assets in trust funds. Let them all go work at Burger King. They had privilege, they fucked up, they pay the price for fucking up.

    This is why there are things like tumbrel rides. When you really fuck up, and don’t show the slightest contrition for how your fuckup affects others, you should pay a very high price for that fuckup.

  36. 36
    John Cole says:

    As I recall, you were a big defender of the bailout, no?

    I grudgingly supported the bailout, because I felt a systemic collapse would have been a disaster. I also supported having everything be public, supported an audit of the fed, supported changing the rules of compensation for these guys, charging a fee per transaction, ending the computer flash trading, as well as any number of other things to rein in the abuses.

    I know that the only point of being a commenter is to turn everything into a binary construct so you can scream “TOLD YOU SO,” but shit was a bit more complicated than “YOU WERE A BIG CHEERLEADER FOR THE BAILOUT.”

  37. 37
    noodler says:

    7.77T! I just threw up in my mouth a little bit.

  38. 38
    catclub says:

    @bin Lurkin’: Of course there were those claiming the total was $23Tr, too. Or was it $33Tr?

  39. 39
    FlipYrWhig says:

    Even at the time I supported doing that thing that would have made everything better and only punished the bad people who totally deserved it. You know the one. The one that they refused to try, because it was just too good an idea, so they had to stamp it out. Really is a shame, too.

  40. 40
    Villago Delenda Est says:

    @schrodinger’s cat:

    The Chinese solution is only applied to the really greedy outliers. Once you’re in the club, and you don’t get too greedy, you’re cool. Never mind that you’re still in the 1% and fuck the 99%.

  41. 41
    Howlin Wolfe says:

    @daveNYC: Yeah, the Swedish solution was for the government to nationalize the banks, at least temporarily, if I remember rightly.
    I thought it was the best one, based on the results in Sweden. It would have, however, produced howls from the wingnuts and teatards and glibertarians that would have been heard all the way to Stockholm.

  42. 42

    @Villago Delenda Est:

    This is the part of “capitalism” that pisses me off no end. These assholes scream about not “punishing success” by taxing them too much, and that “irresponsible” people should have to “live with the consequences” and all that shit. But really, all they’re saying is that we shouldn’t “punish” rich people. And that poor people should have to “live with the consequences”. To these cockbags, “rich” = “successful”, even if they inherited all their money. “Poor” = “irresponsible loser who doesn’t deserve any help at all”. These people should be in lunatic asylums.

  43. 43
    Bullsmith says:

    This issue of the financial markets asset-stripping the governments and populations of the West is really the core issue that isn’t being solved, either here or in Europe. IF the crisis was so bad that they needed trillions in secret loans, why wasn’t it bad enough to get anyone fired? Not even sent to jail, just fired.

    Crony capitalism isn’t capitalism.

  44. 44
    geg6 says:

    @Howlin Wolfe:

    It would have, however, produced howls from the wingnuts and teatards and glibertarians that would have been heard all the way to Stockholm.

    And that would be different from now, how? Seriously, this is the bunch who are screaming bloody murder over raising taxes for the top earners by a couple of percentage points in the middle of a deep recession. When aren’t they screaming bloody murder about sockalism and class warfare?

  45. 45
    wilfred says:

    Binary, eh? Well as I recall the main binary operation at the time was the either/or one you mention,. i.e. if we didn’t ram the bailout through than the entire financial system and our way of life would collapse. It was pretty heated rhetoric – a smokescreen for the banks to grab all the chips on the table.

    What I objected to at the time was the ‘better safe than sorry’ construct – as if they were the only two options available. I’m not saying that was true in your case but the fainting couch had a line a mile long.

  46. 46
    Villago Delenda Est says:

    These stupid assholes are BEGGING for the Place de la Concorde solution to this particular problem.

    Give it to them.

  47. 47
    geg6 says:

    Reposted after stupidly using the s-word and finding original comment in moderation.

    @Howlin Wolfe:

    It would have, however, produced howls from the wingnuts and teatards and glibertarians that would have been heard all the way to Stockholm.

    And that would be different from now, how? Seriously, this is the bunch who are screaming bloody murder over raising taxes for the top earners by a couple of percentage points in the middle of a deep recession. When aren’t they screaming bloody murder about sockalism and class warfare?

  48. 48
    Villago Delenda Est says:

    Oh, this is rich.

    On this page I’m getting a Googlead for NADEX…the North American Derivatives Exchange…subject to US regulatory oversight (like that’s stopped any of these criminals in suits)

    Let’s get more financially baroque! By all means!

    On the “Jump, Fuckers!” sign…that’s so pre Reagan. There was a time when these financial guys had a sense of honor…if they fucked up, they jumped. They were ruined. Nowadays, they all have golden parachutes, and there are no consequences for fucking up. None. Fuckup as you will.

    They are honorless curs. Treat them like honorless curs.

  49. 49
    boss bitch says:

    Oh yeah, nationalizing the banks. That would have went over well…and BP, we should have nationalized them too.

    fuck.

  50. 50
    bin Lurkin' says:

    @catclub: There were those who were wrong completely and those who were right and those who were wrong by a matter of degree.

    Of the three groups only the latter two are shrill.

  51. 51
    Soonergrunt says:

    @schrodinger’s cat: I’d buy into that WRT the banksters.

  52. 52
    maya says:

    So….. where exactly did the FED get their 7.77 Plan cash from? Do they have their own paper mill and printing presses down in the basement with logs going in the back door and pallets of $1000 bills coming out the front? The uniquely pungent smoke billowing from the pulp processors stacks should have been the tip off. They must have had high tech scrubbers installed. A techinque perfected during Operation Surge in Iraq.
    New OWS sign needed:
    Where’s my pallet?

  53. 53
    Glen Tomkins says:

    “…revealing borrower details would create a stigma—investors and counterparties would shun firms that used the central bank as lender of last resort—and that needy institutions would be reluctant to borrow in the next crisis.”

    Wow.

    You can’t fault Bernanke for his intelligence, because this is the most succinct and cogently argued statement I have seen of the moral hazard created by the bailout.

    But, you know, if you can state, so clearly, one of the main reasons not to do the bailout, as if it were a reason to do the bailout, then there is a distinct problem with how that undoubted intelligence is being used. There may have been actually valid reasons to do the bailout, or at least something that would have achieved the key results of the bailout, but the moral hazard created by the bailout is the leading reason not to have done it, to have done other things to prevent financial meltdown.

    If the free market is to function, then entities in that market must be subjected to the discipline of results. Financial institutions that showed poor judgment need to have that deficiency exposed in plain view precisely so that potential investors can function their performance into their investment decisions. Concealing bad judgment from the public leaves potential investors the prey of institutions whose reliability they have been misinformed of by having evidence of their past incompetence hidden.

    As for the concern that such institutions might prefer suicide to taking govt money in future crises if the govt now kisses and tells about the last crisis, well, please! Please, Mr. Bernanke, throw the taxpayer into that briar patch. Rather than worry about the neagtive impact in an emergency of the banks not accepting bailout, we should prepare for the next emergency by broadening the govt’s resolution authority. Resolution, not bailout, is what should have happened in the last crisis, and would have been less of a legislative innovation to pass the laws necessary to make it happen than the laws necessary to make the bailout were. By passing those laws broadening resolution authority now, before the crisis, we would wipe away the moral hazard we created by doing bailout in response to the last crisis.

  54. 54
    Soonergrunt says:

    @geg6: Because this, which benefits their rich benefactors, is the right kind of socialism.

  55. 55
    Bullsmith says:

    @boss bitch:

    So you feel handing piles of free money to the banksters while leaving the housing and employment markets to wallow “went over well?”

    The government owning the banks is better than the banks owning the government.

  56. 56
    Corner Stone says:

    @wilfred:

    What I objected to at the time was the ‘better safe than sorry’ construct – as if they were the only two options available. I’m not saying that was true in your case but the fainting couch had a line a mile long.

    One prime thread example showcased here in a DougJ goodie:
    Caught in a TARP
    And to me, it is not odd in any way to notice the people who were preaching the Do or Die meme from that time period.

  57. 57
    lol says:

    @maya:

    You’re coming up short on operating expenses and need $100 to get by to the next day. You have income coming in and a history of repaying loans so I give it to you.

    The next day, you pay back the $100 plus maybe 10 cents in interest because it was a low risk loan for one day. But you’re still not above water so I need to loan you $100 again which I do.

    Now, I do this for you every day for a year and you repay it each time.

    Technically, I’ve loaned you $36,500, but really, my risk was only ever losing that $100.

    Do this on a much larger scale with a lot more banks and that’s where you get the assorted scary sounding numbers being thrown around.

  58. 58
    El Cid says:

    The article and investigation highlighted in this post has a number of emphases and new claims, and it seems to me that they are indeed worthy of consideration and commentary.

    Bloomberg and its journalists did an enormous amount of work in this investigation, it seems. The work to me appears worthy of consideration in its own right, above and beyond instinctive reactions as to whether or not one supported ‘bailouts’ or ‘not bailouts’. It was very difficult to gain access to this evidence, and it was very difficult to review several dozen thousand financial documents and communications.

    Someone thinking this investigation interesting might comment on the following points made (or emphasized) in the article:

    (1) Federal Reserve actions on a staggeringly large scale were kept secret from lawmakers, competing corporations, regulators, and the general citizenry of the nation whose regulations establish the Federal Reserve.

    (2) The scale of Federal Reserve secret loan support for a small number of gigantic financial corporation is in itself a subject worthy of discussion and disclosure, both with regard to certain shorter term periods and longer term supports.

    (3) Those commercial institutions receiving massive secret loan supports used their protected status to lobby against regulations on the financial industry, regulations which aimed at controlling the dangers posed by the said financial industry.

    (4) The secrecy of the loan efforts to these clearly failed financial corporations played a determining role in the politics of passing and not passing financial regulations.

    (5) The narrative established in the points above thus completely changes the narrative of what happened in the governmental and quasi-governmental response to the U.S. / global financial collapse versus narratives in which Federal Reserve loan supports were either (a) more publicly known, and/or (b) smaller in scale.

    Here is an example of how those themes were woven together in the linked article:

    Congress, at the urging of Bernanke and Paulson, created TARP in October 2008 after the bankruptcy of Lehman Brothers Holdings Inc. made it difficult for financial institutions to get loans.
    __
    Bank of America and New York-based Citigroup each received $45 billion from TARP. At the time, both were tapping the Fed. Citigroup hit its peak borrowing of $99.5 billion in January 2009, while Bank of America topped out in February 2009 at $91.4 billion.
    __
    Lawmakers knew none of this.
    __
    They had no clue that one bank, New York-based Morgan Stanley (MS), took $107 billion in Fed loans in September 2008, enough to pay off one-tenth of the country’s delinquent mortgages.
    __
    The firm’s peak borrowing occurred the same day Congress rejected the proposed TARP bill, triggering the biggest point drop ever in the Dow Jones Industrial Average. (INDU) The bill later passed, and Morgan Stanley got $10 billion of TARP funds, though Paulson said only “healthy institutions” were eligible.
    __
    Mark Lake, a spokesman for Morgan Stanley, declined to comment, as did spokesmen for Citigroup and Goldman Sachs.
    __
    Had lawmakers known, it “could have changed the whole approach to reform legislation,” says Ted Kaufman, a former Democratic Senator from Delaware who, with Brown, introduced the bill to limit bank size.

    These are not comments or opinionating on my part. They are the points established or aimed at in the original investigation.

    The article also points out the widespread understanding among industry insiders that we are left with no way of preventing a similar crisis once again, and how that context has been manufactured by the systematic falsification of the narrative of post-collapse financial industry support.

    Also, banks were able to use the no-penalty loaned money loaded into their coffers without restriction in order to generate profit, tens of billions of profit per institution, by sheer dint of the scale of free money available. Money that was not made available to them by the sweet refinement of their Galtian sweat, but by 3rd world economy-style oligopsonistic financial industry practices.

    (If it amuses anyone, you can remember that this even links directly to Newt: up until the morning that the Republican House voted against TARP [on the presumption that Pelosi et al would deliver more Democrats than agreed, in my view], Newt had been barnstorming the pundit route for the Teavolutionaries to stop Big Soshullism; when it became clear that his advice would be followed, he reversed his point that very morning and began urging this terribly imperfect legislation be passed. Which it was, that afternoon, and in a manner which did not leave the Democrats in the House exclusively holding the flaming bag of shit. I wonder how all those banking people behind the scenes and the Fed officials looked out at Newt’s actions during those hours in which the TARP vote had failed? In any case, Newt continues to push the narrative of Jimmy Carter-Barney Frank-CRA-soshullism-ACORN and so let’s make kids sweep floors.]

  59. 59
    Comrade Nimrod Humperdink says:

    Speaking of Galtian Overlords, anybody catch this new move from Hank Greenberg? Story’s almost a week old but I didn’t see it until now.
    This dude carries his balls in a wheelbarrow, he has to.

    Seriously, I just don’t have any words for this. Good luck on your jury selection if it gets that far.

  60. 60
    wilfred says:

    Wow, it sounds almost as if a tiny group of people were exercising enormous power and influence over the whole country. Nah.

    “Lawmakers knew none of this.”

    To be taken with a freight train’s worth of salt. Then rubbed vigorously into the wound.

  61. 61
    Mouse Tolliver says:

    Bernanke in an April 2009 speech said that the Fed provided emergency loans only to “sound institutions,” even though its internal assessments described at least one of the biggest borrowers, Citigroup, as “marginal.”

    So Citigroup was the worst of the worst. I wonder if Erin Burnett’s fiance was working for Citigroup at the time.

  62. 62
    El Cid says:

    @Comrade Nimrod Humperdink: Perhaps they could be reimbursed to the value of their entire company, when the company’s value had reached zero or below.

  63. 63
    catclub says:

    @El Cid: Re: The secrecy of the loans:

    They did not report the loans on their annual/quarterly reports. It would be nice ( i.e will never happen) if the SEC fined them for false statements in their financial reporting.

    I remember that flip-flop of Newt and other RW bloviators on the TARP vote.

  64. 64
    El Cid says:

    @wilfred: I thought it was cute to quote both Gregg and Frank saying the same phrase, “We didn’t know the specifics.” I certainly believe that part. I also believe that politicians in general would have run from ‘the specifics’ had any approached them too closely.

  65. 65
    Montysano says:

    Mark me down as one who felt we should have allowed the Too Big To Fail entities to.. well, fail. Yes, it would have sucked hard for a couple of years, but by now we might have been climbing out of it, with a more sane system in place. As it is, virtually nothing of significance was fixed in Dodd-Frank, and as we speak, the GOP is trying to gut D-F even further.

    We’re dancing around the edge of another liquidity crisis, with this one being much worse than 2008, and probably unavoidable. It will be an interesting sociological experiment when electronic money freezes up and teh ATMs go dark.

  66. 66
    shano says:

    http://player.vimeo.com/video/32597394?autoplay=1

    Economists banding together to change the conversation even further.
    One of the biggest problems is the Econ. curriculum. Alternatives are not heard in this corrupt political system.

  67. 67
    catclub says:

    @Comrade Nimrod Humperdink: Hank Greenberg is also pretty famous as a bridge player.
    So is James Cayne. I am pretty sure it was Cayne who was head of Lehmann Brother and at a bridge tournament and could not be bothered to be interrupted the weekend that Lehmann Brothers collapsed.

    On Bridge Base, the one sure way to get tossed off a table where James Cayne is playing is to bring up Lehmann Brothers.

  68. 68

    You moron. The banks were given those loans by a Democratic Congress (2007 and 2008), which are your guys. The President (Bush) does not have the power to just give out loans- your guys did it. And conservatives didn’t support Bush in this effort- they savaged him more so than you did.

    You’re an idiot- you think you know what’s going on, but you don’t- you’re part of the problem, supporting the very people who you pretend not to support. The Tea Party spoke out against all the bailouts, including the bank one- your guys (the Occupy Wall Street) only whines about wanting more handouts.

    Plus, your guy (Barack Obama) raised more money from Wall Street and bankers than McCain in 2008- by a massive amount. The very guy you support demonstratably had considerably more support from Wall Street than McCain, who you opposed.

    Get smarter.

  69. 69
    Holden Pattern says:

    I don’t see the problem here. Remember that our entire economy is controlled by the confidence fairies who need the government to provide constant propitiation to them in the form of negative-interest loans, extractive industry subsidies, and tax preferences for profitable sectors.

    All that the Fed did was increase the required offerings to the confidence fairies, who were worried that the financial sector job creators might have to tell the truth about their actual status, and so demanded extra propitiation for a year or two. Perfectly reasonable.

  70. 70
    shano says:

    And here is Bernie Sanders grilling Bernanke:

    http://www.youtube.com/watch?v.....ture=share

    Making progress but the rules are not in force or fully implemented?

  71. 71
    DanielX says:

    @Horrendo Slapp (formerly Jimperson Zibb, Duncan Dönitz, Otto Graf von Pfmidtnöchtler-Pízsmőgy, Mumphrey, et al.): Nope, they don’t belong in asylums, they belong in fucking prison, literally. I read a quote a while back to the effect that if Lloyd Blankfein was sent to a hard time, pound’em in the ass prison – say the famously mean Federal prison in Marion, IL – for three to five, all this bad behaviour would stop. Rich people don’t like jail, they tend not to thrive there. They did all this shit and got away with it, and they are still getting away with it, and they will go on getting away with it. Because there are no consequences….Citibank (to name one of the most egregious examples) has been “admonished” by the SEC on numerous occasions. What happens? Citi pays a fine “without admitting or denying guilt” and goes on its way doing business in the same fraudulent way, because they can. The fine is a cost of doing business, sort of like disposing of toxic waste.

    After all, the enforcers at the SEC wouldn’t want to piss off their future employers when they leave government service.

    http://boards.fool.com/brutal-.....t=postdate

  72. 72
    wilfred says:

    At the time, I felt the bailout was equivalent to pumping blood into a corpse and said so.

    The part that pisses me off the most was the Chicken Little rhetoric that made the whole thing possible. Even now, anyone who bought into that can’t complain, can they? I mean, if the stakes were that high, then no number was too high.

    How could it be if the only alternative was the economic collapse of the country? Concealing the real amount indicates to me that they knew they were bullshitting.

    Well, what’s the point. Barney Frank has moved on (coincidence), so should we, right?

  73. 73
    shano says:

    Conservative Teacher. There is not right/left paradigm on this issue. You can count the politicians who are NOT bought out by Wall Street one one hand, Bernie Sanders is one of them. All Republicans are bought and the vast majority of Democrats are bought out by Wall Street.

    At this point we all must know that this corrupt system has to change. We cannot keep relying on electing people and placing them in a corrupt system. Human nature being what it is, and the system being rife with malfeasance and corruption, very few people could escape being corrupted.

    This system has to change.

  74. 74
    numbskull says:

    @schrodinger’s cat: “but was not rescuing the financial system an option?”

    The rescue could have, and I argue, should have, included:

    1. Direct aid to troubled homeowners
    2. Increased regulation for any institution taking the bail out, including no-bonus clauses
    3. Increased regulation of the entire sector
    4. Investigations of fraud (which may or may not be happening now)

  75. 75
    JGabriel says:

    Bloomberg:

    The size of the bailout came to light after Bloomberg LP, the parent of Bloomberg News, won a court case against the Fed and a group of the biggest U.S. banks called Clearing House Association LLC to force lending details into the open.

    Clearing House? Wow, they really were lottery winners. Not even pretending otherwise.

    “Oh my, God! Martha! We’ve won the Clearing House Sweepstakes! Hurry up and clean the living room! Ed McMahon’s gonna be here with our check any minute now!”

    .

  76. 76
    Soonergrunt says:

    @shano: You are wasting your time. Being a conservative, he thinks that corruption is the natural state and that the corruptors are OK, and that the Government shouldn’t exist to be corrupted in the first place. That’s classic conservative/tea bagger thinking.
    Being a teacher, he spreads this incredibly stupid dogma to children.

  77. 77
    numbskull says:

    @Howlin Wolfe:

    It would have, however, produced howls from the wingnuts and teatards and glibertarians

    But didn’t that happen anyway? And doesn’t still happen every effing day? I mean, if they’re going to wheeze on about Michelle O at a NASCAR event (can’t call it a race, really), then why not give them something to REALLY whine about. Maybe they’ll hyperventilate, faint, and then we can have at least one peaceful afternoon.

  78. 78
    RP says:

    I think a lot of people are conflating a couple issues: (1) whether or not we should have bailed the banks out, and (2) what the conditions of the bailout were and should have been and how the banks reacted afterwards.

    I think the bailouts were absolutely necessary, and while these numbers sound scary, there really wasn’t that much risk for the taxpayers. The problem is really (2): the banks should not have been allowed to hand out big bonuses and lobby against stronger regs when they were clearly failing as institutions.

    EDIT: And I agree with post 74.

  79. 79
    MagicPanda says:

    I am not sure I understand the outrage. Could someone with a stronger background in economics help me understand this?

    Here is my reading of the situation.

    * Various banks made stupid decisions
    * The Fed loaned these banks a lot of money so they wouldn’t go bankrupt
    * In large part, the money was paid back.

    So what is the issue?

    1) Is the issue the money that was not paid back?

    If so, what is the amount? Is this the 7.7T figure that is being passed around? I don’t think so.

    2) Is the issue that these loans were given out with favorable terms (e.g., below market interest)?

    For example, if I lend you $1000 at 0% interest, and then you lend it out at 5% interest, I am giving you free money. But it’s not $1000 of free money. Maybe it’s $50 of free money or whatever.

    If this is the issue, what is the value of the “free money” part of this deal? Is that the 7.7T figure that is being tossed around?

    3) Is the issue that the banks were supported at all instead of being allowed to collapse?

    If so, I think I prefer stability over armageddon.

    What I disagree with is that it looks like we didn’t do a good enough job of attaching strings to the bailouts (e.g., limits on executive pay, or some sort of conditions on lending the money back out). Also, we didn’t spend the same amount of money / effort helping to bail out homeowners.

    Anyway, if someone is more enlightened on this topic, I’d love a clear explanation of what is going on here. Thanks.

  80. 80
    Commenting at Balloon Juice since 1937 says:

    @schrodinger’s cat:

    was not rescuing the financial system an option

    It could have been done differently. If you bail out the banks then you get to own them i.e. nationalize the banks,their share holders get nothing, etc. That’s how it should have been handled.

  81. 81
    Bullsmith says:

    @MagicPanda:

    I think there are two issues:

    1) There is very strong indication of widespread fraud in the MBS makets. There has been no significant investigation of it.

    2) According the staunches defenders of TARP, the entire western economy was threatened by the insolvency of the banks. The people that created this problem have been rewarded with the highest profits (and bonuses) in the history of their industry. Meanwhile, very real negative effects have been felt across broad swaths of the rest of the population. As a result, not only is there an enormous risk the same problems will reoccur, there is in fact an enormous financial incentive for those who created the problem to do so again. Rather than creating stability, we have locked in instability. Look at how the same issues are playing out today in Europe. This is stability?

    The US is in the hands of addicted gamblers. Covering their losses is not a viable long term solution.

  82. 82
    ornery says:

    I wonder why this hasn’t gotten more netroots attention: http://www.huffingtonpost.com/.....72099.html

    “As a result of these GAO reports, we learned that the Federal Reserve provided a jaw-dropping $16 trillion in total financial assistance to every major financial institution in the country as well as a number of corporations, wealthy individuals and central banks throughout the world.”

    Gee. These are large numbers being tossed around. I agree with those who think we need some clarity here.

  83. 83
    El Cid says:

    @A Conservative Teacher: TARP was passed by the House with a majority of House Republicans voting for it.

    This is why the morning vote failed. The House Democrats offered only as many House votes as would pass the bill if a majority of House Republicans voted for it as well.

    It was not passed in the House by some undefined ‘majority’ with Democrats and a minority of Republicans.

    It was passed by a majority of House Republicans as well as by a majority of House Democrats.

    Feel free to try and squirm out of that, to pretend that Republicans didn’t vote for TARP, but Republicans in the House were as equally supportive of TARP

    This is why you hate Nancy Pelosi. Because if she’d done the typical thing and just made sure it passed because it was important legislation, exclusively with a Democratic majority or maybe a few Republican House votes, you would have dropped this flaming pile of shit into Democrats’ laps as though it was their legislation.

    But you couldn’t do that. You see, it wasn’t that ‘some’ Republicans in the House voted for TARP. It was that MOST House Republicans voted for TARP. The majority. A clear majority of House Republicans voted for Hank Paulson’s bailout of the Bush Jr. financial collapse.

    This is why you had to pull that whole ‘Tea Party’ routine, because Nancy was too smart to let you fuckers blame the TARP vote on Democrats.

  84. 84
    El Cid says:

    It seems that few here care about the actual content of the article or its investigation, or see any of its findings as significant or interesting or at most mildly so, so I don’t see why anyone should talk about it.

  85. 85
    Villago Delenda Est says:

    Transparency…it terrifies the parasite overclass of the top 1%.

    They will fight it by any means at their disposal.

  86. 86

    @MagicPanda:

    1) Is the issue the money that was not paid back?

    If so, what is the amount? Is this the 7.7T figure that is being passed around? I don’t think so.

    No, and nobody has said that. The article doesn’t say that, Cole didn’t say that, and from what I can tell, none of the commenters above have said that.

    2) Is the issue that these loans were given out with favorable terms (e.g., below market interest)?

    For example, if I lend you $1000 at 0% interest, and then you lend it out at 5% interest, I am giving you free money. But it’s not $1000 of free money. Maybe it’s $50 of free money or whatever.

    Well, that’s certain part of it, but it’s not as innocuous as you think it is. Think about the scales involved here — this basically involves massive transfers of profits to the banks from the bank’s customers based on free money from the Fed. It’s very easy to make lots of risk-free money on capital you don’t have to raise and on which there is no cost of capital, and it certainly doesn’t take the financial geniuses that the bankers claim they are.

    Also, if you’re getting metric fucktons of free money on which you can charge interest, and you’re telling people that your capital ratios are just fine and you’re still a genius and profitable, you’re a goddamn liar, and if you’re telling people that just after your behaviors crashed the world’s economy and while you’re taking that free money and using your false profitability and capital ratios to show that you don’t need to be regulated, you’re pretty much completely fucking evil.

    If this is the issue, what is the value of the “free money” part of this deal? Is that the 7.7T figure that is being tossed around?

    $13 Billion. Go read the damn article.

    3) Is the issue that the banks were supported at all instead of being allowed to collapse?

    If so, I think I prefer stability over armageddon.

    What I disagree with is that it looks like we didn’t do a good enough job of attaching strings to the bailouts (e.g., limits on executive pay, or some sort of conditions on lending the money back out). Also, we didn’t spend the same amount of money – effort helping to bail out homeowners.

    Right, so the executives took some of that risk-free profit and handed it over to themselves in the form of bonuses. They took some of it and spent it on massive lobbying campaigns to prevent the government from imposing any consequences on them for their catastrophic cupidity and stupidity, and from requiring any kind of support for any of the people that the banks destroyed with that cupidity and stupidity. And they did that all while they were saying that they were still fucking well-capitalized financial geniuses and that regulation or consequences would just hurt the confidence fairies who run the financial markets.

    So, yeah, that’s basically what happened. Also, just so we’re clear, ANY BUSINESS THAT NEEDS MASSIVE DAILY INFUSIONS OF CAPITAL FOR MONTHS JUST TO STAY AFLOAT IS NOT RUN BY FUCKING GENIUSES AND SHOULD NOT BE LEFT ALONE. Everyone who runs that business needs to be fucking fired, the equity holders zeroed out, and the whole business overhauled. But instead, these people got massive bonuses, zero consequences for their behavior, and they still run the joint.

  87. 87
    RareSanity says:

    @El Cid:

    We all are sometimes (some more than others) guilty of not reading a linked article, in full, before we commence our commenting.

    In this case, I actually did read the entire article, and it was sickening.

    The whole point of the article to me, is that if this borrowing were known at the time, there may have never been a TARP to argue over. If people (and I’m including politicians in this one) knew that billions of dollars were already going out, daily, to these institutions to keep them afloat, the conversation would have been completely different.

  88. 88
    Holden Pattern says:

    @Holden Pattern:

    No, and nobody has said that. The article doesn’t say that, Cole didn’t say that, and from what I can tell, none of the commenters above have said that.

    Where “that” is complaints about any bank’s failure to repay the loans to the Fed.

    Also, what is up with the blockquote not straddling paragraph breaks? That seems to be a new “feature.”

  89. 89
    Corner Stone says:

    @Holden Pattern:

    Right, so the executives took some of that risk-free profit and handed it over to themselves in the form of bonuses. They took some of it and spent it on massive lobbying campaigns to prevent the government from imposing any consequences on them for their catastrophic cupidity and stupidity, and from requiring any kind of support for any of the people that the banks destroyed with that cupidity and stupidity.

    They also took a huge chunk of the profits from the free money and continued to make massively leveraged bets in markets with no true counterparties to liability.
    So when those bets failed they could continue their massive wealth transfer from the many to the few.

  90. 90
    MagicPanda says:

    @Holden Pattern: Uh, I DID read the article. Or maybe I should say I skimmed it.

    But somehow, by the time I got to the bottom of the article, I’d forgotten what I’d read at the top.

    I was getting all ready to flame you back, but I realized that I was actually the idiot in this situation. (facepalm)

  91. 91
    Holden Pattern says:

    @MagicPanda: Yeah, I was a bit, um, aggro in that comment. I’m so used to concern trolls playing the ingenue that I really have to learn to dial it back. Also, this whole subject makes me really aggro.

    Sorry about that.

  92. 92
    Corner Stone says:

    @RareSanity:

    If people (and I’m including politicians in this one) knew that billions of dollars were already going out, daily, to these institutions to keep them afloat, the conversation would have been completely different.

    The politicians didn’t know because they specifically did not want to know. They used the Doomsday speech by Paulson as their CYA moment. Now they want to come back and say, “If only I’d known, things woulda been different!”
    No, not so much.

  93. 93
    RareSanity says:

    Apologies in advanced for the back-to-back comments, but I am so enraged by this, and the fact that people don’t seem to grasp the enormity of the malfeasance.

    If this borrowing were known at the time, I don’t think the “too big too fail” meme would have taken hold.

    The fact of the matter is that without the Fed’s measures, these institutions, had already failed. The Federal Reserve, was the facilitator of a massive fraud, committed against the Federal Government and the American People. It’s that simple.

    The Fed allowed every lie told by these institutions, to the government, to the exchanges and to the populace, to appear as if they had merit.

  94. 94
    Holden Pattern says:

    @RareSanity: And both parties own the Fed now — Bernanke is a (truly) bipartisan appointee.

    But we should all be glad to vote Dem, because a shit sandwich is still better than sewage and broken-glass soup.

  95. 95
    elftx says:

    @AlladinsLamp:

    Did you read any of the comments? I especially liked the following:

    Nov 28, 2011
    5:22 am EST

    I suspect the real reason the Fed fought to prevent this data being realised is they realised that the long list of morons in the financial “journalism” field would do exactly what they have then proceeded to do. These Bloomberg reporters KNOW what they are inferring is nonsense because it has been pointed out to them over and over again. At some point, they have to stop be “wrong” and simply be called what they are, liars.

  96. 96
    Montysano says:

    @El Cid:
    I’d like to read it, but the article appears to have been taken down. It was also linked at another blog that I read, and that link is also dead.

    ETA: links working again.

  97. 97
    Holden Pattern says:

    @Montysano:

    Link works fine for me:

    http://www.bloomberg.com/news/.....ncome.html

    It’s also right there on the front page of bloomberg.com.

  98. 98
    RareSanity says:

    @Corner Stone:

    I don’t buy that argument.

    I may accept, that Congress didn’t push hard enough, to obtain more data. However, it appears that the Fed was dead set against making this information public, and it took a lengthy court battle to finally force the release.

    The doomsday proclamations, were designed to protect the secrecy of the arrangement for the failed institutions, not the Fed itself. The banksters needed this stuff to go through quickly, eliminating the possibility that the Fed were forced to reveal the information.

  99. 99
    Corner Stone says:

    @RareSanity: Hank Paulson falling to his knees and declaring the world would end tomorrow unless they got that money NOW.NOW.NOW. was exactly what the politicians desired. Otherwise they could’ve asked one question and if they didn’t like the answer they would have chosen a different course of action.
    The one question being, “Given that we’re not sure of passing a funding mechanism, what other sources do these institutions have in place to maintain liquidity?”
    From all reports they never asked that question. To me, it makes it pretty clear they chose to not know because they were scared to death of having the answer on record.

  100. 100
    RareSanity says:

    @Holden Pattern:

    But we should all be glad to vote Dem, because a shit sandwich is still better than sewage and broken-glass soup.

    If it were that cut and dry, I would agree with you, but it’s not.

    Don’t think that the majority of the commenters here, are backing Dems, because we think that they great. We back the Dems because, for the most part, they think before they talk (and vote), and that the GOP is an absolute disaster.

    It is called dealing with the reality of the situation. I’m happy to vote for Democrats because, my hope is, it keeps Republicans out of power. That happiness is not based on any being so overwhelmingly impressed with them, as a political party. Although I do think think that Nancy Pelosi is awesome. I would vote for her, happily, because of her merits and accomplishments.

  101. 101
    El Cid says:

    It would have been an interesting world if we had used 7 to 10 trillion dollars to stabilize and refinance and principle-renegotiate mortgages, but this would have been the use of federally-controlled funds to help a bunch of pissant parasites in the population, as opposed to more important, higher level financial work regarding saving a failed financial gambling system.

    In this universe, such funds would never have been available for such frivolous and anti-capitalist purposes; free and no risk and perpetually renewable loans to the greatest, most profitable financial corporations ever to have existed, however, is all in the free market spirit of hard-line economic rationality.

  102. 102
    Holden Pattern says:

    @RareSanity: Look, I’ve given Dems lots of money and an awful lot of time. My rep and one of my senators are pretty good. So I vote Dem because the Republicans are insane, and I’m fairly happy to vote for some individual Dems.

    But the Dems as a coalition deliver a shit sandwich. The Republicans as a coalition deliver sewage and broken glass soup. And as long as the Republicans continue to deliver that meal, the Dems don’t have to do any better than a shit sandwich, and won’t, for a variety of reasons. That’s enough to vote for them, but not enough to be excited about them.

  103. 103
    Corner Stone says:

    @El Cid:

    In this universe, such funds would never have been available for such frivolous and anti-capitalist purposes

    The lessons learned in such an outcome would have doomed our society. It would have been like handing every Joe Mortgage a big orange color food stamp card. For nothing!
    Can you imagine the shame of staying in your home due to a handout from the government? I’m not sure there’s a branding iron big enough to have left a stamp on our collective asses for that eternal ignominy.

  104. 104
    RareSanity says:

    @Holden Pattern:

    But the Dems as a coalition deliver a shit sandwich. The Republicans as a coalition deliver sewage and broken glass soup. And as long as the Republicans continue to deliver that meal, the Dems don’t have to do any better than a shit sandwich, and won’t, for a variety of reasons. That’s enough to vote for them, but not enough to be excited about them.

    I don’t think anybody is excited about the Dems as a whole.

    Certainly not me.

    The situation with our government is certainly disappointing and depressing. I wish I had an answer as to how to make it better. I don’t, but I do know what will make it even worse, electing Republicans.

  105. 105
    DanielX says:

    @Bullsmith: Um….actually, there has been significant investigation, there just haven’t been any serious consequences. As noted by the Honorable Jed Rakoff:

    http://dealbook.nytimes.com/20.....forcement/

    Today Judge Rakoff basically told the SEC to fuck off with their settlement with Citibank:

    http://www.nytimes.com/2011/11.....ti.html?hp

    It’s been investigated all right, but not prosecuted in any serious way. The Justice Department is out to fucking lunch somewhere on this whole issue. Some readers/commentors may not recall the S&L crisis of the 1980s, but at the time there were a thousand FBI agents working on various criminal cases, and people did go to jail, the most notorious being Charles Keating. Compare and contrast – today banks fuck up right and left, get fined in amounts that amount to a slap on the wrist, and get rewarded 1) by being able to access almost free money at the Fed’s discount window and 2) by keeping worthless assets on their books but counting them as real assets. Mark to market accounting? Never heard of it.

  106. 106
    shano says:

    We just need to clone Bernie Sanders.

  107. 107
    El Cid says:

    @DanielX: I think one of the biggest lessons learned by those participating in the S&L crisis prosecutions and arrests etc was to attack every potentially threatening law and rule and enforcement possibility possible, so that the larger planned theft rings would end in few to no prosecutions.

    This is why derivatives weren’t just de-regulated, but anti-regulated.

  108. 108
    El Cid says:

    @DanielX: Clearly that judge is a dangerous radical blogger.

  109. 109
    Montysano says:

    @Corner Stone:

    Hank Paulson falling to his knees and declaring the world would end tomorrow unless they got that money NOW.NOW.NOW. was exactly what the politicians desired.

    If you believe Hank Paulson (and that’s a mighty big “if”), in 2008 we were within hours of the “Off” switch being thrown on the electronic economy. ATMs go dark, and your debit card doesn’t work. Trucks stop running, grocery shelves don’t get restocked, etc.

    Given that we seem to be devolving into a barbarian culture, I’m glad that we avoided that scenario.

  110. 110
    Bullsmith says:

    @DanielX:

    The SEC takes criminal prosecution off the table even before it investigates. The FBI has a task force dedicated to protecting banks from fraud, no task force dedicated to fraud by the banks. I really don’t think any regulatory or law enforcement body has made it a priority to investigate financial fraud. I’ll check out the dealbook article, thanks for the link, don’t have time now. In terms of the judge throwing out the settlement proposed by the SEC because it is in no way equitable or just but is rather a get-out-of-jail-for-a-token-fince cover-up really is exactly my point. The SEC is actively enabling the criminals they catch to get away with most of their ill-gotten proceeds intact, and of course without ever admitting to any wrongdoing.

    The prosecutions haven’t happened because the investigations that are necessary to carry them out haven’t been done. The scale of the crime is too large for this to be an accident. The SEC, the Justice Department et al. have willfully decided to “look forward not backward” in this area. Which is really not a plausible model for law enforcement. It is however, a great model for post-facto legalizing crime. The proposed settlement for the robo-signing fraud on the courts is a great example, although there seem to be a couple of AGs who are balking at the idea of whitewashing deliberate crime. Not many thought, and they’re under enormous pressure from, who else, the Justice Department, to fall into line.

  111. 111
    Corner Stone says:

    @DanielX:

    Some readers/commentors may not recall the S&L crisis of the 1980s,

    I have long argued on this blogula that the S&L “crisis” was a Proof of Concept, or test run. They figured out the mechanisms and institutions that could be any possible hindrance, and then proceeded to takeover, corrupt or dismantle them.
    They just did it harder and faster this time.

  112. 112
    schrodinger's cat says:

    @DanielX: They have been steadily dismantling the regulatory framework put in place after the great Depression since the 1980s. There is a time lag of about 10 years between the gutting and the next collapse. Repeal of Glass Stegall in late 90s huge financial crisis 10 years later.

  113. 113
    schrodinger's cat says:

    @Bullsmith: SEC is chronically underfunded. They just don’t have the resources to conduct investigations.

  114. 114
    lawguy says:

    What is the most worrisome about this is that the senate wouldn’t apparently know about it if a business journal hadn’t done the investigation.

  115. 115
    Corner Stone says:

    @Montysano: The interesting thing, at least to me, were the dire screeds about how Europe would also crater.
    Well, trillions and trillions later, here we are. The rich and powerful are more rich and powerful and the EU Zone may or may not still crater. Depending on how much pressure the bernank can apply to get his wealthy cheese eating friends some free funds. Courtesy ala US taxpayer, natch.

    People keep clinging to the myth that we were about to all die. But somehow, with just enough free money, everything stabilized for a time. Now of course, we’re all about to die again. Unless the free money starts flowing again. Funny how that works.

  116. 116
    Corner Stone says:

    @lawguy: Does the senate know about it now?

  117. 117
    brantl says:

    @A Conservative Teacher:Please get smarter, yourself. McCain’s policies were completely unworkable, at least all of the ones that he espoused in public. He backed the same policies on the bailout, when it cambe to a vote. His other enconomic policies were appropriate for an 8 year old child.

  118. 118
    Bullsmith says:

    @schrodinger’s cat:

    True, and underfunding the SEC is a feature, not a bug. Honestly the whole regulatory response to the collapse of the MBS industry (thus revealing the accounting fraud behind it) seems to be “nothing could/can be done.”

  119. 119
    Montysano says:

    @Corner Stone:

    Now of course, we’re all about to die again. Unless the free money starts flowing again. Funny how that works.

    It will continue until it can’t, and then it won’t. IMHO we’re near the event horizon, but I’d be happy to be wrong.

  120. 120
    DanielX says:

    @Bullsmith: You got that right on the whole “look forward not backward”, right down to getting rid of their old case files…

    http://www.rollingstone.com/po.....s-20110817

    Why, if I didn’t know better I’d say there was some sort of conspiracy in play here, but then people would say I need a new tinfoil hat.

  121. 121
    shano says:

    http://www.bloomberg.com/news/.....ncome.html

    Read it and weep. At this point we need complete systemic changes , how to get there is the question.
    All our politicians benefit from the system the way it is. All the Multinational Corporations benefit from the current system. None of us benefit from it at all, obviously. It has done incredible harm to the whole western world at this point.

    How does one get politicians to vote against their own financial interests? Thats the conundrum.

  122. 122
    schrodinger's cat says:

    @A Conservative Teacher: GOP answer to all our economic woes is deregulation and tax cuts.
    Can you explain how this strategy will get us out the current economic doldrums?
    This problem transcends both parties, the gutting of the regulatory framework started in Reagan’s time and has been going on for the last 30 years at least. Glass-Steagall was repealed under a Republican Congress and the Clinton administration. So there is plenty of blame to go around. But all deregulation all the time is the GOP mantra, that’s what they are advocating even now.

  123. 123
    soyaki says:

    @A Conservative Teacher: Your post fails to mention the sitting President at the time this all happened. How unsurprising.

    Trying to make this a partisan issue is obviously failtacular, as the true powers operating on federal monetary policy are clearly doing so at a level well above and disconnected from retail party politics.

    Perhaps you teach pottery or something similarly suited to your limited cognitive horizon.

  124. 124
    numbskull says:

    @Corner Stone: Hard to know if this is sarcasm.

  125. 125
    Mike G says:

    @schrodinger’s cat:

    What was needed after the bailout was stricter regulations and more transparency, and that has yet to happen.

    What was needed before the bailout was stricter regulations and more transparency, and the Repuke/Bush/Cheney/Greenspin crony cabal did their damnedest through lobbying and “free market” “deregulation” broadcast propaganda to make sure they didn’t suffer the slightest regulatory inhibition as they drove the country off a cliff in pursuit of a few more pennies of profit.

  126. 126
    numbskull says:

    @soyaki:

    Perhaps you teach pottery

    Why that hate on arts teachers, dude?

  127. 127
    Corner Stone says:

    @numbskull: I was considering that pottery is freakin’ hard, and clearly beyond the capabilities of people who disavow all creativity.
    But then I realized that all conservatives excel at ‘spin’, so maybe thrown pottery is something they can actually do.

  128. 128
    John Carter says:

    If we had let the banks fail, people “MAY” have suffered more because of a “Possible” depression!

    If the 7.7 trillion were given to the 300 million of us instead of the banks, we’d each get around $25,000 (in addition to our wages) which would have been put back into the system to generate sales and products.

    But then people may have paid off their credit debts and paid down mortgages and the banks wouldn’t still be rolling obscene profits.

    Would have been a bailout for the people instead of the banks. New banks would have arisen as would have more than likely better regulation.

    But the banksters wouldn’t have gotten the profits! And the politicians wouldn’t have filled their pockets.

    Great job by all concerned…Bush and Company followed by Obama and Company.

    The banks got the hope and we’re stuck with pocket “change.”

  129. 129
    gene108 says:

    @Montysano:

    Yes, it would have sucked hard for a couple of years, but by now we might have been climbing out

    Try a couple of decades, unless a massive public works project on the scale of WW2, made itself available for the government to pump money into the economy.

    Without a sound financial system in place and able to function, it is back to bartering for services.

  130. 130
    shano says:

    I still have not seen a workable solution to fixing this in our current political system. That is really what is so frustrating about it.

    Getting money out of politics is one. Breaking up the Too Big To Fail Banks is another. Regulation of Multinational Corporations. People are now saying banks should be simple ‘utilities’, and I agree. I just haven’t seen a workable way to make it happen.

    Entrenched power bases are entrenched. Do we need some dynamite or a nuclear blast?

  131. 131
    Ruckus says:

    @Holden Pattern:

    Well said.

    What I see as the big problem is that without TARP as cover the Fed could not have loaned the banks this amount of money. Everyone would had to ask how did the banks recover. TARP of course. But we see that this was not enough and there was no way that congress would have approved of 7.7 or 13 trillion so we get the back door friends deal. No one has to know!

  132. 132
    schrodinger's cat says:

    @Mike G: We still need them now, to prevent a replay of the movie we say in 2008. The incentives haven’t changed so you can bet that this will happen again.

  133. 133
    Greyjoy says:

    The problem with the bank bailout isn’t that they are or are not “too big to fail”, or that their failure would or would not have resulted in an economic collapse, or even that they paid the money back.

    The problem with the bank bailout is that we bailed out THE BANKS after they lost trillions of dollars in what basically amounted to a bad bet. Homes lost trillions in value, foreclosures shot through the roof, and investors in these fake bonds lost a kajillion dollars. Okay….but they got their money BACK. They got their bonuses BACK. They didn’t lose their jobs. They have everything they started with. Some have even profited enormously from this fiasco.

    What about the homeowners? What about the ones who have been paying their mortgages only to find a lock on the door because Bank of America can’t be bothered to look up the deed? The ones who watched their home values drop to 1/2 or 1/3 of the purchase price and cannot sell without taking an enormous loss? The ones who lost their income because one of the earners in their household got laid off, and have applied and reapplied for mortgage relief, only to be told by the banks to file forms repeatedly and jump through hoops because these banks have NO intention of actually providing relief? What about the neighborhoods full of foreclosed homes that are a magnet for thieves, vandals and squatters, yanking down everyone else’s property values along with them?

    We have a few hundred or a few thousand bankers who got HALF OUR COUNTRY’S FUCKING GDP as a reward for their fuck-up, and meanwhile 30 million Americans have watched their single greatest asset, their home, become worthless. They will *never* recover their home’s value in their lifetime. Entire neighborhoods are going under due to the resulting blight. And yet who gets the blame for all this, for having the nerve to buy houses in the first place and who are being held as not only financially responsible, but morally and ethically responsible for their alleged mistake? Even when their only mistake was to take out a mortgage that ended up being robo-signed by Wells Fargo, or by buying a house well within their means and then being laid off by some company who decided to use the economy as an excuse to reduce their overhead? THE TAXPAYERS.

    I mean, you gotta be fucking kidding me.

  134. 134
    Bullsmith says:

    @gene108:

    I have two questions. 1) Since the Fed was able to make 7.7 trillion dollars available to banks, why wasn’t a massive infrastructure project a viable option? and more importantly 2) Why do so many people insist that because we need a functional financial sector and credit system, rampant crime must go unpunished and those who have failed massively shall not be removed from their positions of power? There is a vast area of possible action between of “letting the whole capitalist system collapse” and “provide direct funding to ensure Jamie Dimon will have his bestest years ever!” Yet these are consistently presented as the only viable, possible choices available. They weren’t. They’re still not.

  135. 135
    Greyjoy says:

    Also, I would like to submit that if your company is “too big to fail” in the sense that its failure would have a significant negative impact on the nation’s economy, then you are too big to be a company and should be a government entity. No country can afford to leave their economy in the hands of a few people who have their own self-interest as the paramount goal. Least of all ours.

  136. 136
    shano says:

    Prof. Kyle about the Fed:
    Another thought on the Fed not letting the system melt down

    There is a huge difference between saving the banks (and then breaking them up into smaller banks, if I had my way) and saving bank stockholders and management. In my opinion the crisis required the Fed to save the banks as institutions in order to prevent worldwide financial meltdown. That would have bought the time to reregulate and break them up (which didn’t happen). But there was no need whatsoever to do it in a way that bailed out bank stockholders. They made their choices, lost, and if capitalism means anything they should have ended up selling apples on the corner. Management should have been fired, and the hogwash that only they had the rocket scientist smarts to figure out how to deal with the situation should have been ignored.

    A bit of arithmetic illustrates the point. Citibank, at the time of the TARP, had a total market capitalization in the vicinity of $8 billion. The taxpayers put $40 billion into them. For that money we should have owned them lock stock and barrel 5 times over. At the time, Citi paid back the TARP loan and the government was bragging about how we MADE MONEY (I think our “profit” was 8%, but I might be wrong), but their market cap had risen to $120 billion. If the government had simply taken over and tossed the stockholders out like they should have done, we could then have sold the shares back into the market for a profit of 300% to the Treasury. And in the meantime we could, as owners, have fired whoever we wanted and then sold it back into the market in as many separate pieces as we liked. Instead, the taxpayers paid for a bailout of the stockholders and THEY got the profit, while the same inept managers continued to run the bank. THAT is the real problem, in my mind.

    We are now set up with the same owners and the same managers with nearly the same laxity in regulation to do the same thing over again. Not only that, but they now have the experience of having no negative consequences for their behavior. Count on it, they are not reformed.

  137. 137
    boss bitch says:

    This argument that the money could have been given to Americans is a waste of time. Banks or no banks, that much money would never be sent out to the American people to do whatever they want with it. What was the last amount sent when Bush was president? a little over a grand for couples and 1/2 that for singles?

    Personally I don’t agree with that solution.

  138. 138
    boss bitch says:

    @Bullsmith:

    I think nationalizing the banks and nationalizing BP is as good an idea as using trillion dollar coins to solve the debt ceiling “crisis”.

  139. 139
    shano says:

    Oh, and @Occupy Wall Street #ows #OWS

  140. 140
    Greyjoy says:

    As opposed to sending that money to the banks to do whatever THEY wanted with it? After they did whatever they wanted with the first batch of cash, which caused the problem in the first place? Like when you give a 16-year-old a new Porsche, and he gets drunk and drives it into a lightpost, so then you go buy him a new one?

  141. 141
    Greyjoy says:

    Remember that the banks didn’t just make an honest mistake here, by trying to corner the market on OJ and then having a bad harvest. They committed a hell of a lot of fraud and the unraveling of their scheme is what caused the collapse in the first place.

  142. 142
    shano says:

    Occupy Wall St.
    Basically the banks are stealing our futures. We pay them so we can go to school. We pay them for shelter. We die in wars for them. They destroy our environment, throw us out our homes and they control the government. We can not rely on government to regulate them because they are the government.

    We live iin an oligarchy. The good news is more and more people realize this everyday. We are rising up to resist the illegitimate corporate controlled government.
    Details of upcoming actions coming soon.. We are just getting started.
    I certainly hope so.

  143. 143
    shano says:

    The problem is global. This is the problem with globalization & Neo Liberalism. Our TBTF banks are deeply connected to the Euro Zone.

    The US bail out of AIG was mostly a bail out of foreign banks in addition to the usual suspects here in America.
    They are attempting a controlled demolition.

    http://www.youtube.com/watch?v=Je3eMpRGx70

  144. 144
    shano says:

    http://www.greenewave.com/a-cr.....allstreet/

    No accountability and no justice. these are crimes against humanity.

  145. 145
    Bullsmith says:

    @boss bitch:

    Well I can see you’ve put a lot of work into those thoughts of yours.

  146. 146
    Caz says:

    You make less and less sense as time goes by. It’s as if you have no understanding of what capitalism, freedom, and fairness are all about. You stand for everything that is bad for this country, which along with the other useful idiots, help put in power people like Obama who have done immeasurable damage to this country in only 3 years. And still, you don’t realize what’s going on. How much clearer can things be? Some people are just lost causes, gullable and naive forever. Please don’t vote.

  147. 147
    Rihilism says:

    @A Conservative Teacher:

    You moron moran.

    My sincerest apologies, usually the BJ crowd is a little quicker at pointing out commenter spelling errors.

    No need for a thank you, you’re most welcome!….

  148. 148
    triangular gutters says:

    @El Cid:

    This is why you hate Nancy Pelosi. Because if she’d done the typical thing and just made sure [TARP passed, without ensuring votes from a majority of the Republican members as well], you would have dropped this flaming pile of shit into Democrats’ laps as though it was their legislation.

    You’ve mentioned this before, and I should have thanked you then as well. It is a good explanation for why the morning vote failed, and an easy-to-digest story of what leadership actually does. Newt’s flip from “hang this sucker on the Democrats” to “the screaming voices on the phone properly say patriots must help pass this for the good of the country” was just one of many dominoes tipped by this.

  149. 149
    Rihilism says:

    Some people are just lost causes, gullable and naive forever.

    Sounds like the final declaration of someone who will not be commenting here again. kthanxbai. [hugs]…

    Oh, I and think you meant “FREEDOM!”. You’re welcome….

  150. 150
    Corner Stone says:

    @Bullsmith:

    There is a vast area of possible action between of “letting the whole capitalist system collapse” and “provide direct funding to ensure Jamie Dimon will have his bestest years ever!” Yet these are consistently presented as the only viable, possible choices available. They weren’t. They’re still not.

    Well, specifically in cases like boss bitch, it’s not viable because it isn’t what President Obama chose to do. That’s really as deep as she considers any alternative.
    Did President Obama end up with that outcome? No? Then it was not possible.

  151. 151

    The GOP has already cleaned house of a lot of the guys who voted for these bailouts, thanks to a Democratic landslide in 2008 and Tea Party primary challenges in 2008- of course our job isn’t done, but it is time for all you leftists to step up to the plate now and vote out your precious Democrats.

  152. 152
    shano says:

    http://www.democracynow.org/20.....australian

    These banks can shut down any and all independent media they choose.

    Isn’t that convenient?

  153. 153
    Odie Hugh Manatee says:

    @A Conservative Teacher:

    The GOP has already cleaned house of a lot of the guys who voted for these bailouts, thanks to a Democratic landslide in 2008. Unfortunately, Tea Party primary challenges in 2008- brought in another class of sellouts so of course our job isn’t done so now it is time for all us, teahadists and wingers alike, to step up to the plate now and vote out the rest of our precious Republicans.

    Fix’t that for ya. I think you garbled it up translating from the original German.

  154. 154
    triangular gutters says:

    @A Conservative Teacher:

    The GOP has already cleaned house of a lot of the guys who voted for these bailouts

    But if you view it through El Cid’s analysis, the vote was theater. Party whips could let members draw straws to see who would be allowed to vote against it but those votes would not affect the outcome.

    Voting out individual members does not directly help. What would help is changes in party leadership. Also a political press who could help the electorate see through the way protest votes are gamed.

  155. 155
    shano says:

    triangular gutters, here is the opinion of an old man about that now. The only solution is to get corporate money completely out of the political system

    MOYERS: … I, I honestly … I saw a poll the other day … 52% of the American people believe that both parties no longer reflect their interests. And I am part of that 52%. I can no more defend the Democratic Party than I can praise the Republican Party. I mean I don’t understand the weird things going on in the Republican Party. I do not understand this marriage of ideology and the language and, and, and the irrelevance, the immaturity of their political discourse, the sheer opposition that they set out to mount against Obama … that partly due …

    But I do know why the Democratic Party is corrupted. They decided that they would go to the same sources of great wealth … corporations and others … and they are today in thrall to many of the same corporate and rich powers that the, the Republicans are.

    We have two parties serving corporate business America and no party that serves … ideally … that serves the middle class or working people. And so I, I’m without a party, Dick. I know we always have to make some choices in election … you make a slight degree of … you’ve got to cast your vote so it’s this decision based on this differentiation.

    But, as a whole, both parties are, are, are critical reasons for the crisis in our democracy.

    Our democracy is dysfunctional. It isn’t working. It isn’t solving a single problem. The Senate might as well not be there.

    It is … what it was a hundred years ago when David Graham Phillips, a great muckraker in the, in the vein of Upton Sinclair and Nellie Bly and others wrote a book called The Treason of the Senate. Well, the Senate has betrayed its Constitutional obligations. And so both parties today are contributing to the dysfunction of democracy.

    It cannot come from within the two parties today. They are frozen, paralyzed, purchased. And so it’s got to come … Howard Zinn’s great message … and he was a flawed historian … he was … we know that from his life and his records. But he got this right. He said, “Do not look to your leaders to bring about change. Change comes only when people organize and fight from outside the system, when the change that they need … everybody he said … every ordinary people … every ordinary person should be a history maker”.

    OWS

  156. 156
    triangular gutters says:

    shano, that’s a great Moyers quote.

    The context was a reply to A Conservative Teacher’s electoral sweeping approach. I didn’t mean that fixing the parties we have is the way to go. I was just saying the bailout votes could not be taken at face value, and had to be interpreted in the context of party leadership and vote counting.

  157. 157
    DanielX says:

    @Greyjoy: Sadly, no…to use a phrase from those fine young men at that blog. Not kidding, not for a minute. And the most irritating part is that for the fucking bankers, it’s like the whole deal never happened. Bond trader mentality at work – what happened yesterday is history, and what happened more than three years ago now might as well have never happened at all. Try reading descriptions of the sociopathic mentalities at work from The Epicurean Dealmaker.

    Except….except that thse bumblefucks have pretty well demonstrated that 1) they’re addicted to risk, because the more they risk the more they get paid and 2) they are nowhere near as smart as they would like everyone to think they are. Some of them are indeed scary smart, but as to really big picture thinking, um….no. Their models predicted what would happen with 99% accuracy, which sounds pretty good. However, viewed from another perspective – say the perspective of one of the taxpayers who perforce bought these douchewaffles’ bad debt – it sucks. Would you get on an airplane knowing that there was a 1 in 100 chance that it would crash? And that every time you got on a plane, that probability got higher and higher? But this is where the IBG/YBG (I’ll Be Gone, You’ll Be Gone) mentality came in, and still rules today. From the perspective of these absolute, roaring, screaming assholes, why wouldn’t you keep on doing what you’ve done in the past, knowing that the Fed/Treasury will bail out your industry in general and your company in particular? After all…and this is a quote from The Big Short: “What’s the worst thing that can happen? We make $200 million and then get fired?”

  158. 158
    Neo says:

    As I read through the Bloomberg piece on the banks & the Federal Reserve, I kept asking myself .. “where is the news ?” It was written in a manner that made you think the authors were hyperventilating the entire time that they wrote it, but it kept coming up short.
    We had these huge sums of money like $1.2 trillion and then the “killer” .. they made $13 billion in profit over two years. My quick math has that as 1.08% profit over two years (even lower if you use that $7.7 trillion number). These bankers should be deeply ashamed .. what a pathetic return.
    If you consider that the Federal Reserve isn’t really owned by the government, and that taxpayers didn’t pay a dime (as opposed to GM, Chrysler, AIG, Fannie Mae, Freddie Mac, Solyndra, etc. etc.), I am at a loss to explain “where the ‘there’ is ?”

  159. 159

    […] Was Santelli just doing his best to protect his banker buddies? Here he is complaining about socialism, and his banker buddies were doing just that behind the curtains!!! (John Cole sentiments) […]

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