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Secret and Lies of the Bailout
January 7, 2013 11:11 AM   Subscribe

Secret and Lies of the Bailout. "The federal rescue of Wall Street didn’t fix the economy – it created a permanent bailout state based on a Ponzi-like confidence scheme. And the worst may be yet to come." [Via]
posted by homunculus (77 comments total) 46 users marked this as a favorite

 
The Atlantic has a piece in this month's issue along similar lines. I haven't quite finished reading it yet though.
posted by IvoShandor at 11:14 AM on January 7, 2013 [4 favorites]


I love Taibbi's writings, hyperbole & all. I wish somebody would ask Obama once in a press conference, what he thinks about his writings.
posted by growabrain at 11:18 AM on January 7, 2013


Has Taibbi gotten any awards for doing these things? He's the one reason I ever pay attention to Rolling Stone anymore.
posted by spitefulcrow at 11:42 AM on January 7, 2013


I wish somebody would ask Obama once in a press conference, what he thinks about his writings.

I wish that a politician would answer truthfully and without any concern for potential political fall-out.
posted by Fizz at 11:45 AM on January 7, 2013


I wish that a politician would answer truthfully and without any concern for potential political fall-out.

That's basically the plot of Bullworth.
posted by eustacescrubb at 11:47 AM on January 7, 2013 [4 favorites]


I can't read Taibbi any longer because it doesn't change anything. What I think; what anyone who reads it thinks, or does, is 110% irrelevant. That's how corrupt the system is. There are so many cockroaches they no longer fear the full light of day.
posted by seanmpuckett at 11:49 AM on January 7, 2013 [27 favorites]


Of course we have a bubble in reliance on US currency and government deficits.

Just like we knew we had a bubble in real estate, or tech stocks, etc.

I just wish I could pick the right year the bubble will pop.
posted by surplus at 11:51 AM on January 7, 2013 [1 favorite]


The HBO film, Too Big to Fail, provides a face & a background to the events over four years ago. That, in conjunction with PBS' Frontline segments, Money, Power and Wall Street, gave me at least some idea as to (a) what the hell are mortgage backed securities and CDOs and (b) how did trading in this sector nearly ruin the world economy?
posted by coachfortner at 11:54 AM on January 7, 2013 [7 favorites]


Between the two articles's (Taibbi's in RS and Partnoy's in the Atlantic), I think the Atlantic piece is better for being less breathless.

One of the interesting thing about the reforms is that to be effective they need to be convincing. There is a certain clap-if-you-believe-in-fairies aspect to the whole thing, wherein the problem is actually solved (in part, anyway) if enough people believe that it's solved, and the investors start investing and the banks start lending. But it's increasingly apparent that the reforms didn't even manage to convince sophisticated investors, much less the general public, that the banks were clean and acting transparently.

On a personal level, as someone who has worked in several banks of varying sizes during and since the 2008 crunch, I don't think the problem is with banks per se, it's with big banks. Even factoring in the usual internal dysfunction of large organizations, big banks seem particularly bad at adapting or changing their own processes and cultures. I'm not sure exactly why that's the case, though.
posted by Kadin2048 at 11:59 AM on January 7, 2013 [6 favorites]


Banks used their hundreds of billions for almost every purpose under the sun ... one of the most disgusting uses they found for all their billions in free government money was to help them earn even more free government money.

So wait. The banks were the 47% Romney was talking about?

posted by mmrtnt at 11:59 AM on January 7, 2013 [1 favorite]


It would be nice if Taibbi could let his articles stand on the merit of the facts they present instead of resorting to cheap Michael Mooresque propagandist ploys such as: "The pudgy, stubby­fingered former World Bank economist..."
posted by Behemoth at 12:00 PM on January 7, 2013 [4 favorites]


anyone who thinks that "the bailout" somehow created a new situation that didn't exist before hasn't studied history from day 1. the government has essentially guaranteed the banks since March of 1933.

there was this thing, it was called the New Deal. And it had a lot more than the Civilian Conservation Corps and the Social Security System. It had titanic government credit programs which went far, far beyond "the bailout."

And what is "the bailout?" It isn't. There is TARP, there is the Detroit Bailout, there is the AIG bailout. Each had a purpose. They didn't work perfectly, nothing human ever does. But what they did was reassure the US markets that the government was not going to sit by, Ron Paul-style and do nothing and would, instead, make sure that our currency did not deflate so quickly that we would be tossed into a giant depression that was as big or bigger than the deflation of 1929-1940.

And that was done.

And what were we averting? When Eric Cantor and John Boehner tried to trick the Dems into carrying all of the water on TARP and the vote did not pass, 1.1 trillion dollars in stock market capitalization disappeared in one day. In a single day the stock market dropped 777 points. This after weeks and weeks of losses. In fact, three of the top ten greatest stock market losses occurred in the last two weeks of September 2008, including 9/15/08 losses of 504 points and 9/18/08 losses of 449 points.

On September 2, 2008 the stock market was at 11831. On December 1 it was at 8149.

Indeed, the last quarter of 2008 saw -8.9% GDP growth and the first quarter of 2009 saw -5.3% growth. The US economy contracted 15% in half a year. The greatest recession since the great depression really actually existed. And when the market wipes out a third of its value in a few short weeks, you have to reassure the country that the government is going to be there.

Are the banks too big to fail now? Some doubtless are. Does that mean that TARP was not necessary? No. One can say TARP was needed, and that greater bank regulation and breakups are needed at the exact same time.

Let's really, truly be honest. Do we want a situation where the government is just going to let the economy collapse like St. Ron Paul would like? What is it that Taibbi wants? He understand so little of economics and business that he can't even say. And since this is like his 500th piece on this subject, isn't it time for him to speak up and tell us not what he doesn't like from five years ago, but what he wants now to fix the problem? And shouldn't he also spend a little time discussing what can be actually get votes and what things that could actually get votes we ought to put forth?

The problem with Taibbi is that he has a lot of adjectives, but not a lot of detail and he simply cannot paint the complex picture this actually describes. A far superior author on these issues is the New York Times' Joe Nocera, who tells a lot of the same story without the useless firebombs and with a lot more experience in the field. At best, Taibbi is a political reporter with some interest in business. Nocera knows what he's talking about having worked in business journalism at Fortune, national journalism at Newsweek and left wing journalism at the Washington Monthly.
posted by Ironmouth at 12:01 PM on January 7, 2013 [33 favorites]


Do we want a situation where the government is just going to let the economy collapse like St. Ron Paul would like?

Yes.
posted by mrgrimm at 12:09 PM on January 7, 2013 [5 favorites]


Blahblahblah, its the boomers fault. Their pensions are all dependent on bank shares/bonds or instruments derived from them (annuities). Banks and bankers are just intermediaries who talk an (albeit slightly too chunky) piece of the action. Its easy to get angry at salaries and bonuses but forget where most of the fat is going to.
posted by Damienmce at 12:10 PM on January 7, 2013


If you read an article by Taibbi and think you that you now understand the subject he was writing about, you do not understand the subject.
posted by b1tr0t at 12:12 PM on January 7, 2013 [6 favorites]


Do we want a situation where the government is just going to let the economy collapse like St. Ron Paul would like?

Yes


This means a worse outcome than if we didn't. It means more deaths than would otherwise occur due to medical bankruptcy, suicide, deaths from being homeless.

Because Ron Paul is a obstetrician, not an economist.
posted by Ironmouth at 12:18 PM on January 7, 2013 [3 favorites]


If you read an article by Taibbi and think you that you now understand the subject he was writing about, you do not understand the subject.

If you read a single article by anyone on a complex subject and think you understand it, of course you're wrong.

Taibbi will give you a fantastic start, however, to understanding what's really going on. Not what the banks say is going on, but what's actually happening.

You know, with the lies for the Iraq war, and with all the fraud and abuse involved, at least we got a client state out of the deal. With TARP and 'too big to fail', we have become the client state.
posted by Malor at 12:20 PM on January 7, 2013 [4 favorites]


Do we want a situation where the government is just going to let the economy collapse...

No, we want a situation where a government is going to let a corporation collapse and the economy keeps working.
posted by DU at 12:21 PM on January 7, 2013 [7 favorites]


The problem with Taibbi is that he has a lot of adjectives, but not a lot of detail and he simply cannot paint the complex picture this actually describes. A far superior author on these issues is the New York Times' Joe Nocera

Oh please, Nocera writes tepid centrist inside the beltway horseshit just like the rest of them. Taibbi is painting a lot of detail that the mainstream media ignores into a complex picture of our country's continued slide into oligarchic banana-republic status.

His current article going into a lot of numbers and small-picture narratives adding up to the obvious fact that the bailout was sold as help for mainstream America and has instead been a ludicrous, secretive, lies-all-the-way handout to the very institutions that created this crisis through their reckless, unpunished behavior. It shows how the Obama administration was pushing out this propaganda while their actual actions showed they cared for little beyond foaming the runway for big banks.

I can't believe you even put "bailout" in scare quotes just to tee-ball up so you can pretend-inform us about the complexities, when much of the Taibbi's piece was spent explaining the various under-publicized acronym-soup programs that functioned to launder money into bank balance sheets.
posted by crayz at 12:22 PM on January 7, 2013 [16 favorites]


I want to be as enraged as I should, but I don't have time to read the article. And... I suspect its thesis is very close to other Taibbi pieces on this and related issue. I'm looking forward to insight generated from the comments.
posted by Wash Jones at 12:24 PM on January 7, 2013 [1 favorite]


Taibbi hasn't evolved his style I see. Time it takes to Taibbi to engage in pointless, irrelevant (person is bald and big-build? = evil!!!!!) ad hominem badmouthing ( that also, for good luck, manages to make a scifi pop culture reference that totally doesn't make any sense - did he even watch the film or TV show?) : less than half a sentence into the article. I didn't bother with the rest. l'll read The Atlantic piece instead.
posted by Bwithh at 12:24 PM on January 7, 2013


I think the problem is not the fact money was given to these major corporations and banks to keep them afloat. The problem is, unlike historical "bailouts" or other US gov interventions, this money didn't come with many conditions. I personally feel that it should have been:

"Ok, you seem to have gotten yourself stuck on your backside, and the country is suffering as a result, and could potentially cause everything to go to hell. If we're going to flip you back over, at a considerable risk to ourselves, we need you to agree to the following so this doesn't happen again."

Instead, it was more like:

"I think money will fix this problem. If I give you money, will you give me money every 2 or 6 years? Cool. Here you go. Feel free to complain or blame us, boss."
posted by Bathtub Bobsled at 12:28 PM on January 7, 2013 [3 favorites]


Taibbi is painting a lot of detail

Detail? Over Nocera? hardly. Taibbi pukes one of these up every quarter, right? Its the same piece, with the same broad-brush speculation and utter lack of detail as the rest of them.

I don't even know if Taibbi is more left than Nocera. He seems to have no policy proposals other than he dislikes everything and refuses to come up with his own idea of what is right. And when you get to the level of this kind of "think" piece, you have to have an idea of what to do, and an idea of how to get there.
posted by Ironmouth at 12:29 PM on January 7, 2013


I can't read Taibbi any longer because it doesn't change anything. What I think; what anyone who reads it thinks, or does, is 110% irrelevant. That's how corrupt the system is. There are so many cockroaches they no longer fear the full light of day.

While he's an entertaining and thought-provoking writer, what qualifies Taibbi to be a world-changing "light of day"? He's a pundit, for god sakes.
posted by KokuRyu at 12:36 PM on January 7, 2013


When the bailout was being discussed/debated, I was listening to talk radio (which I don't very often, but it was NPR, so it was OK) when a caller gave this opinion:

"We were stampeded into the Patriot Act, then stampeded into war and now they want to stampede us into bailing out the banks"

Which seems to pretty much sum up the big political decisions of the times. It's as if every government agency and most corporations have seized upon fear as a tool to get their way.

For example, how long has the MPAA been predicting piracy will destroy the movie industry, which just happened to have a record box-office take - $10B - in 2012?

I am hardly a financial wizard, but I do wish the government could have found some way to help ailing institutions end their lives gracefully, instead of putting them on eternal public life-support.

posted by mmrtnt at 12:37 PM on January 7, 2013 [4 favorites]


This means a worse outcome than if we didn't.

Over the short term, yes, that's true. But you have to run an economy for the long term. You can't just think about this year. Economies need pain to thrive, just like forests need fires. That's how they adapt to new conditions, and how forests clean out the undergrowth.

If you prevent all economic pain for too long, you end up with the exact same problem that you get from not allowing forest fires. Eventually, a fire gets out of control, and destroys the entire forest, because of all the underbrush that has grown up.

What should have been a series of small economic fires, from which we could have easily recovered, has now become a catastrophic blaze -- and the longer we put off the adjustments, the worse that blaze becomes.

We deployed many trillions of dollars to tell the economy to keep doing what got it in trouble. And now the Fed is deliberately taking steps to try to reinflate the housing bubble! This is dangerous and stupid beyond imagination. I suspect even the Weimar Republic was better served by its bankers.

Up to about 2001 or 2002, if we'd let things adjust themselves, it would have ended in tears, but only tears. We'd have had the Second Great Depression (back in 2001, mind), and we'd be OVER it by now, recovering and healthy again, although scarred by the worst decade since the 1930s. And we could have let banks fail again in 2006, although that would have resulted in the Greater Depression, one more like the really nasty one from the late 1800s. We'd be maybe halfway through that.

But now? Things are so maladjusted now that I believe the eventual adjustments, when Mr. Market forces them on us, will end in blood. It already has, a little bit -- just look at Occupy, who were willing to show up and say, "This isn't fair, the way the banks are being treated, we want justice." And they got their faces bashed in for saying it.

We're not solving our problems, we are only compounding them. Printing money and issuing credit does not solve problems. It lets you pretend you don't have them, while they fester. And counter-cyclical borrowing only works if the debts get paid down during the upswings, and that has not happened in over thirty years. Government borrowing for simple expenses, as the central economic driver, is a short-term stimulus, and a long-term killer of economies. Just ask Greece, or Zimbabwe.
posted by Malor at 12:41 PM on January 7, 2013 [11 favorites]


I want to have my cake.

I also wish to eat it.

I am therefore enraged.
posted by aramaic at 12:41 PM on January 7, 2013


What should have been a series of small economic fires, from which we could have easily recovered, has now become a catastrophic blaze

Uh ... what? Having lived through it all, and felt the pain of extended unemployment (large fire there) and losing savings, and now seeing things being somewhat improved in the life of friends and at the national level, I don't know what on earth you're talking about.
posted by raysmj at 12:56 PM on January 7, 2013 [1 favorite]


Honest question: Say it's as bad a Taibbi claims. Stimulus money is being given to banks just to make sure things limp along. Can things recover if the stimulus nurses the economy (via the give-away to banks) long enough to recover to full strength? If so, stimulus has been "wasted" in a bank give-away, but if it brings about the eventual recovery of the economy, it seems that the benefits offset the losses. There's (massive) spillage, but things eventually get back on track. Isn't that better than the alternative?
posted by Wash Jones at 12:58 PM on January 7, 2013


Scratch my saying "large fire," what happened in 2008 was a catastrophic fire, for millions of Americans. It's one thing to say that reforms of the banking system didn't go nearly far enough (I would agree, strongly), it's another to downplay the extend of how bad thing were for a larger number of people from 2008 to mid-2011 and to say that they're "catastrophic" only now. Maybe they might be in the future, but ... not now, certainly not only now.
posted by raysmj at 1:05 PM on January 7, 2013


"The" alternative?
posted by uosuaq at 1:06 PM on January 7, 2013


Economic "growth" for most of the last 30 years* has been absolutely dependent upon going from one Bubble to another. Many people (including me) thought that there was no place they could go after the Real Estate Bubble. I'm beginning to suspect we may still be a couple Bubbles away from the Endgame. And that will make the ultimate final collapse of "the system" even more devastating than I have previously imagined. Which makes me glad that (1) my personal economic collapse occurred a few years ago (unrelated to macro trends) and (2) my life expectancy is currently under 20 years.

*the lion's share of which enriched a select few lions
posted by oneswellfoop at 1:20 PM on January 7, 2013 [2 favorites]


Do we want a situation where the government is just going to let the economy collapse like St. Ron Paul would like?

People can argue back and forth about whether the bailouts should have happened, but they did happen, so it's kind of a moot point now. I am more curious about the actual content of the article, i.e. what happened such that the bailouts were engineered, so that money that should have gotten injected into the economy (and used to rebuild the country) ended up getting locked up in the banks, earning very little interest and affecting no positive economic gains, all at taxpayer expense? And why was this all set up with virtually no oversight over the main players and how the money was spent? If (well, when) we need to bail out banks again, will we have a stronger regulatory system in place to fix these and other problems from this most recent bailout?
posted by Blazecock Pileon at 1:24 PM on January 7, 2013 [2 favorites]


Paul Kiel's reporting on the bailout at ProPublica is withering. There's a nice searchable database and scorecard as well.
posted by deo rei at 1:24 PM on January 7, 2013 [6 favorites]


Scratch my saying "large fire," what happened in 2008 was a catastrophic fire, for millions of Americans.

Yep, and all that pain meant nothing, because nothing changed. All the bad players are still in the game. All the bad practices are still in vogue. Except, now, you're explicitly on the hook when they blow up again, and they will.

If we actually wanted to get healthy again, the adjustments needed to be much more severe. Many companies needed to evaporate, especially banks. But that was deemed unacceptable, and massive resources were deployed with the specific intent of not allowing any adjustment to occur. Your leaders have been doing anything necessary to stop today's pain, but it's not going away, it's all just getting saved up.

2008's pain? Because nothing really changed, it ended up being largely meaningless, except to transfer huge amounts of wealth from you to rich people. We will get to have all that same fun again and again.
posted by Malor at 1:28 PM on January 7, 2013 [7 favorites]


I was dumb enough to earn my living for the 25-odd-years prior to 2008 in the construction industry. In December of 2008, my industry and my livelihood disafuckingppeared. So excuse me if I take what a relatively small group of sociopaths did to our economy personally.

And they are sociopaths. I was taught their attitude, and many, many of their tricks in college as a Marketing Management student. Accounting, especially, was a litany of tricks and dodges. We were literally taught "the only social responsibility a corporation has is to make a profit." We were also always taught what a noble calling it was to make business ever more efficient and profitable. Never mind that we were never required to take an ethics class of any kind.

Both my college and corporate experience convince me, in my bones, that Taibbi has a MUCH better handle on this than most. The tail is wagging the dog, and has been for a long time.
posted by Benny Andajetz at 1:30 PM on January 7, 2013 [6 favorites]


(I didn't have an underwater mortgage, personally, or any mortgage at all, so you're not speaking to me there, Malor. And I can't agree with you--not even remotely--that it would have been OK to let all the big banks go under at one time. Breaking up or nationalizing the banks would have been more advisable. As for "on the hook," I haven't the foggiest notion what you're raving about.)
posted by raysmj at 1:32 PM on January 7, 2013


as someone who worked for a big bank until 2010 (and yes, yes, fine, banality of evil, moral equivalence of being a nazi, heard it all, here even), in IT, I have been told flat out that I was rejected for interviews because that bank was on my resume. There are companies who flat out refuse to hire people, or even look at the resume, of those who worked for them.

So, uh, fuck me, I guess.
posted by mephron at 1:38 PM on January 7, 2013 [2 favorites]


Ironmouth: What is it that Taibbi wants?
I've always gotten the impression he wants more or less the same thing a lot of people want, myself included: Somebody to go to prison for stealing a few trillion dollars in wealth from America's retirement savers. When 69 year-old retirees, who had the value of their retirement accounts cut in half, had to go back to work, but the Diamonds and the Pandits of the world got nice bonuses, engaged in a little insider trading, and came out with more money than they started with, something is desperately wrong.
posted by ob1quixote at 1:43 PM on January 7, 2013 [17 favorites]


Isn't that better than the alternative?

Which alternative? The hypothetical alternative where Washington just played its collective fiddle while the economy burned? That was never going to happen. For better or for worse, the government had to appear to do something in response to the crisis, in the same way that they have to appear to do something in response to every other crisis. (Whether that sort of reactive governance is actually helpful is certainly debatable, but that it's par for the course isn't.) I am personally of the opinion that "do nothing" is an option that the government should exercise more often, but 2008 was probably not the time to do it, and it wasn't going to be in any realistic scenario anyway. The government could have more easily ignored 9/11.

Was what actually happened better than a slightly-more-realistic hypothetical alternative where the government took the opportunity to leverage public anger against the banks in order to drive down their capital reserves to the point where the FDIC could be brought in to dismantle those deemed to be Too Big To Fail, and split them into smaller chunks? No; I think that would have been better. But it too was probably impossible to achieve, given how awash the political system is with I-bank cash.

But that's the missed opportunity in 2008, looking back. Not that we could have just let everything collapse, Ron Paul style; that's just the overture to a Libertarian survivalist fantasy that ends with shooting the less-prepared neighbors when they try to storm your canned food horde.

The missed opportunity was to bring back something like Glass–Steagall and split the TBTF institutions into separate companies by functional areas, the way things were before they achieved regulatory and political capture. The long-term result of that would have been both a healthier economy and a healthier financial sector; the only losers would have been those who've taken advantage of the current (lack of) regulation in order to pillage. There was almost enough anger to do that, but sadly things crested with the high-water-mark of public disgust, and thus political fortitude, just short of what would have been required to break Wall Street's grip.
posted by Kadin2048 at 1:45 PM on January 7, 2013 [8 favorites]


Let's really, truly be honest. Do we want a situation where the government is just going to let the economy collapse like St. Ron Paul would like?

"Fascism should more appropriately be called Corporatism because it is a merger of state and corporate power." - Benito Mussolini

One can opt to use the power of the State to protect Corporations from their mistakes and misdeeds or one can allow the Corporations to fail from their mistakes and misdeeds.

Calling for "honesty" - Iceland allowed the Corporations to take their lumps and things are doing better for them than other countries who opted to coddle the failures. And remember that America is the 2nd version. The 1st was dissolved and the phrase "not worth a continental" has meaning for a reason.

The "honesty" here is thus: In a collapse your "investments" would become worthless and those who are calling for bailing out are motivated by keeping their part of imagined wealth.
posted by rough ashlar at 1:47 PM on January 7, 2013 [3 favorites]


I shouted out "who killed the economy?" when after all it was you and me
posted by telstar at 1:50 PM on January 7, 2013 [2 favorites]


Indeed, the last quarter of 2008 saw -8.9% GDP growth and the first quarter of 2009 saw -5.3% growth. The US economy contracted 15% in half a year.

This is not quite correct. If the US GDP growth rate for a quarter is reported as -8.9 per cent in Q4 2008, that does not mean that the GDP has actually fallen from 100 units to 91.1 units between Q3 and Q4. US quarterly GDP growth figures are usually presented as seasonally adjusted annual rates. The seasonal actual quarterly fall of GDP from Q3 to Q4 2008, in 2005 dollars, was from $13,186.9b to $12,883.5b, or -2.3 per cent growth (I'm having trouble finding raw, non-seasonally adjusted GDP numbers, but you get the idea).

In real terms, GDP grew by -0.3 per cent in 2008, and -3.1 per cent in 2009. It certainly didn't grow by anywhere near -15 per cent.

1. http://www.bea.gov/national/xls/gdplev.xls
2. http://www.bea.gov/national/xls/gdpchg.xls
posted by kithrater at 1:50 PM on January 7, 2013 [5 favorites]


One of the interesting thing about the reforms is that to be effective they need to be convincing.

Consider the lack of accountability to date for malfeasance, why should any of the "too big to jail" crowd have to worry?
posted by rough ashlar at 1:54 PM on January 7, 2013


-Interconnectedness and Systemic Risk: Lessons from the Financial Crisis and Policy Implications
-Industry Structure and Systemic Risk Regulation
-What's Wrong with Banking and What to Do about it
-Big Banks Are "Black Boxes," Disclosure is "Woeful"
-9,500 words by Partnoy and Eisinger in one paragraph
Banks are opaque and hard to understand! This is scary! Even big, sophisticated investors don’t understand the risks big banks take! Financial reporting for banks is scary and complex and mystifying! To calm ourselves, we tried to understand stodgy, prudent Wells Fargo’s financial statements. What did we find? Wells Fargo is big, opaque, complex, and scary!! Even their friendly investors relations person could not or would not answer our questions! We are scared! What should we do? We should send more bank executives to jail for scaring us! Oh, and come up with better, more understandable financial disclosure! Otherwise no-one will ever, ever, ever invest in publicly traded banks again! And then, disaster!!
-You can't regulate with nostalgia
-Basel Becomes Babel as Conflicting Rules Undermine Safety
-Banks, Here's your new liquidity regime. Now stop blaming us. Love, Basel
-Banks Win 4-Year Delay as Basel Liquidity Rule Loosened
-Banks Win an Easing of Rules on Assets
-Surprise, Surprise: The Banks Win

also btw...
-When governments become banks (via via)
-The four business gangs that run the US
-The Alarming Corruption of the Think Tanks
-Robots Don't Destroy Jobs; Rapacious Corporate Executives Do [1,2,3]
-What's mediocre about America? "It's not our businesses or our products that are mediocre, it's our institutions. Our infrastructure, health care system, schools, and cities are, with a few exceptions, disgustingly mediocre." (or our financial institutions ;) [1,2,3]
posted by kliuless at 2:11 PM on January 7, 2013 [19 favorites]


Was what actually happened better than a slightly-more-realistic hypothetical alternative where the government took the opportunity to leverage public anger against the banks in order to drive down their capital reserves to the point where the FDIC could be brought in to dismantle those deemed to be Too Big To Fail, and split them into smaller chunks? No; I think that would have been better. But it too was probably impossible to achieve, given how awash the political system is with I-bank cash.

Its not even the contribution issue (that needs to be solved). Its us. We keep putting idiots in Congress. Imagine a world where we have the GOP of 1967. The possible solutions would be wider and less geared towards Ron Paul. These problems would have been solved long ago.

Hell, imagine a world where Dems called their Congressmen and women at anywhere near the rate right-wingers do. That's all we have ever needed.
posted by Ironmouth at 2:20 PM on January 7, 2013


Taibbi's angry voice is appropriate when our tax money now goes to:

* tribute to the banks
* the military budget
* entitlement programs

The last of which will simply be cut piecemeal as the boomers expire over the next few decades.
posted by MillMan at 2:27 PM on January 7, 2013


but the Diamonds and the Pandits of the world got nice bonuses, engaged in a little insider trading, and came out with more money than they started with

Dimon also got publicly felated by the Senate Banking Committee, which was nice for him.
posted by homunculus at 2:30 PM on January 7, 2013 [1 favorite]


What a shit article. Anyone who was paying attention at the time knew that capital markets had run dry, the dollar was in deflation and the economy was in contraction. I don't remember anyone saying that the bailouts were being done to fix anything- all I remember is that the bailouts were necessary to stem the bleeding and plug the holes. To stop it from getting worse.

And the assertion that the Fed lied about buying toxic assets is itself a lie. Or a shockingly willful failure to google quantitative easing:
The bursting of the United States housing bubble prompted the Fed to buy mortgage-backed securities for the first time in November 2008. Over six weeks, a total of $1.25 trillion were purchased in order stabilize the housing market, about one-fifth of all U.S. government-backed mortgages.
posted by gjc at 3:39 PM on January 7, 2013


Ironmouth: Because Ron Paul is a obstetrician, not an economist.

Ah, I see. So, being that you're a lawyer — not an economist — would you care to retract basically everything you've posted in this thread?

I'm not Ron Paul supporter, but this really takes the cake in terms of ridiculous appeals to authority.
posted by indubitable at 3:50 PM on January 7, 2013 [4 favorites]


2008's pain? Because nothing really changed, it ended up being largely meaningless, except to transfer huge amounts of wealth from you to rich people. We will get to have all that same fun again and again.

I'm not convinced that's largely a specific feature of the bailouts per-se (which happened in a similar corrupt fashion in the UK with similar results); more a result of the intended design of the entire financial and tax system, of which the bailouts were part, aided and abetted by the politicians bought and paid for by Big Money - the politicians are largely of, and for the rich, not the general public - and Paul is part of that as much as anyone, his 'solutions' seem to be primarily about locking in current inequity. Fixing THAT will require a lot more than just fixing the corruption and graft in the banking system, and indeed would seem to be a prerequisite. Not that I disagree that failing to tackle this is only going to make the problem of graft worse and worse over time until it is eventually dealt with by us peons getting fed up of getting screwed or the whole thing collapses in starvation and bloodshed, though.

I do have one question though, for anyone willing; Taibbi says this:
To guarantee their soundness, all major banks are required to keep a certain amount of reserve cash at the Fed. In years past, that money didn't earn interest, for the logical reason that banks shouldn't get paid to stay solvent. But in 2006 – arguing that banks were losing profits on cash parked at the Fed – regulators agreed to make small interest payments on the money. The move wasn't set to go into effect until 2011, but when the crash hit, a section was written into TARP that launched the interest payments in October 2008.

In theory, there should never be much money in such reserve accounts, because any halfway-competent bank could make far more money lending the cash out than parking it at the Fed, where it earns a measly quarter of a percent. In August 2008, before the bailout began, there were just $2 billion in excess reserves at the Fed. But by that October, the number had ballooned to $267 billion – and by January 2009, it had grown to $843 billion. That means there was suddenly more money sitting uselessly in Fed accounts than Congress had approved for either the TARP bailout or the much-loathed Obama stimulus. Instead of lending their new cash to struggling homeowners and small businesses, as Summers had promised, the banks were literally sitting on it.

Today, excess reserves at the Fed total an astonishing $1.4 trillion."The money is just doing nothing," says Nomi Prins, a former Goldman executive who has spent years monitoring the distribution of bailout money.

Nothing, that is, except earning a few crumbs of risk-free interest for the banks. Prins estimates that the annual haul in interest­ on Fed reserves is about $3.6 billion – a relatively tiny subsidy in the scheme of things...
Isn't the entire point of keeping a big chunk of change stored at the Fed to provide banks a financial cushion in the event of future runs and/or drastic reduction in liquidity - such as that which starved many real businesses of essential operating credit, and was ultimately the biggest pain signal of all? Isn't a big reserve a Good Thing, and in fact part of the restructuring we WANT to see from the banks, especially the 'too big to fail' ones such that future shocks won't cause such a drastic seizing up of cash-flows internally and to/from the banks that caused so many small company (and thus unemployment) problems?
posted by ArkhanJG at 3:54 PM on January 7, 2013


Isn't the entire point of keeping a big chunk of change stored at the Fed to provide banks a financial cushion in the event of future runs and/or drastic reduction in liquidity - such as that which starved many real businesses of essential operating credit, and was ultimately the biggest pain signal of all?

This is no longer the official purpose of the US reserve requirement. Reserve requirements in most western countries are instead a tool to implement monetary policy, by helping determine the liquidity of a monetary system. In a dated (1993) paper, the Federal Reserve states:
Since the creation of the Federal Reserve System as a lender of last resort, capable of meeting the liquidity needs of the entire banking system, the notion of and need for reserve requirements as a source of liquidity has all but vanished. Instead, reserve requirements have evolved into a supplemental tool of monetary policy, a tool that reinforces the effects of open market operations and discount policy on overall monetary and credit conditions and thereby helps the Federal Reserve to achieve its objectives.
So, if a central bank sets a reserve requirement of 10 per cent, it does so because it wants to achieve a certain level of liquidty. If banks are instead achieving 15 per cent reserves, then this has the effect of preventing the desired level of liquidty being reached.
posted by kithrater at 4:43 PM on January 7, 2013 [1 favorite]


"What a shit article. "

I liked it for the reminder that GoldmanSachs borrowed $34 Billion of bailout money and never even told their own shareholders. Seems like an activist shareholder could do something with that.
posted by surplus at 5:11 PM on January 7, 2013


this really takes the cake in terms of ridiculous appeals to authority.

Ya sure it wasn't an attempt to curry favour by invoking an unpopular target on The Blue and therefore make his own argument more popular?

But isn't the more ridiculous position is to treat economists as a "science" and that claims of outcomes from "economists" have validity?
posted by rough ashlar at 6:57 PM on January 7, 2013 [1 favorite]




The Federal Reserve believes it is possible that, ultimately, its operating framework will allow the elimination of minimum reserve requirements.

That article is very amusing. Who knows what terrors will befall the US if it starts acting more like Australia, Canada, and New Zealand, and also operates without a minimum reserve requirement?
posted by kithrater at 7:34 PM on January 7, 2013


Who knows what terrors will befall the US if it starts acting more like Australia, Canada, and New Zealand, and also operates without a minimum reserve requirement?

Those countries don't cower before their corporate overlords (or accessories) to the extent the US does.
posted by Benny Andajetz at 7:57 PM on January 7, 2013 [1 favorite]


The US economy contracted 15% in half a year.

Yeah that right there is the problem. What exactly contracted? What you choose to measure as the economy is EXACTLY where the problem lies.
posted by vicx at 9:13 PM on January 7, 2013


1. The bailouts papered over things, to allow extend and pretend.
2. The semi-permanent shortage of labor we've enjoyed for almost 200 years in the US ended somewhere around 1974.
3. The whole system is build around the idea of cheap oil being available forever.
4. Nothing backs the US Dollar, nor has it since 1971.

We're in for a crash that will possibly break civilization. The Great Depression will look like a walk in the park.

I'm amazed they've pushed the end off so long... but I know it's coming, and it'll be ugly.

At some point, the rest of the world is going to stop taking US Dollars for their stuff. Then the rips in the fabric of the US start to tear:
1. Fuel prices will probably go up by a factor of 10
2. At least 1000% cumulative price inflation in the first 2-3 years. (Savers get crucified)
3. Distribution networks will be crippled, down sized, or break.
4. Unemployment stays above 50% permanently.
5. Tax revenues fail, as does Federal governance.
6. Everything becomes very local again.
7. Manufacturing or repairing goods becomes a valued skill, right behind farming.

I'll be around for this, and I'm not looking forward to any of it. I really would rather be wrong.
posted by MikeWarot at 9:27 PM on January 7, 2013


"We were stampeded into the Patriot Act, then stampeded into war and now they want to stampede us into bailing out the banks"

Which seems to pretty much sum up the big political decisions of the times. It's as if every government agency and most corporations have seized upon fear as a tool to get their way.


All that + Debt Ceiling + Fiscal Cliff + Debt Ceiling 2: Beware the Ides of March 2013 => What constitutes law-making in the Congress these days.
posted by the cydonian at 1:23 AM on January 8, 2013 [1 favorite]


"We were stampeded into the Patriot Act, then stampeded into war and now they want to stampede us into bailing out the banks"

I remember reading the term "Helgian Dialectic" in a Lyndon Larouch publication 10 years ago... (and almost gave up trying to understand him right there) and here are the practical examples of what he meant.

1. Figure out what you want to get the US to do
2. Write it up as law, file it in a drawer
3. Cause, (or wait for) (or fail to prevent) an incident which makes the law something possible (9-11, for example)
4. Pull ready-made solution to problem (your law) out, and ram it through Congress.
posted by MikeWarot at 7:59 AM on January 8, 2013 [1 favorite]


Helgian Dialectic

I think you mean Hegelian dialectic, unless Lyndon LaRouche is even weirder than I'd ever imagined. (Admittedly, he usually is.) Even then, it sounds more like a variation of dialectical materialism, whereby you bring about the physical conditions necessary to bring about the appropriate changes in people's minds. Philosophers and/or Marxists are free to correct my half-assed understanding of this.
posted by Sticherbeast at 9:35 AM on January 8, 2013






Gotta hand it to AIG's shareholders: it's pretty ballsy to bite the hand that kept you alive.
posted by Blazecock Pileon at 11:09 AM on January 8, 2013




AIG may sue? Holy mary mother of god that is just mindblowing. They will probably win as it is based on a constitutional right.
posted by marienbad at 4:08 PM on January 8, 2013
















The Colbert Report: HSBC Laundering Charges - Matt Taibbi
posted by homunculus at 9:35 AM on January 17, 2013






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