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In praise of small banks
October 30, 2008 12:43 PM   Subscribe

The nine biggest US banks aren't using $125 billion in federal bailout money to make loans. They're going to use taxpayer dollars to buy other banks.

That's not what we were led to believe when Henry Paulson forced the nine banks to take the money. Turns out the banks could do as they wished with the money.

What about small banks? We seem to have forgotten about the thousands of local, community banks. They have functioned well in the crisis, and reports suggest that they have even benefitted.

A veteran banker who works for one of the big US banks says it's time we did something to help them. Smaller banks, he says, are part of the community and have a better understanding of who their customers are.

"If we make the bailout funds available to the community bankers, I promise they will know what to do with the money. They will lend it and they will make prudent lending decisions, based on direct and comprehensive knowledge of the borrower. So what are we waiting for?"

The big banks -- BofA, Citibank, JPMorgan -- aren't lending because they don't know their customers. They have depersonalized lending by relying on inaccurate credit scoring to make loans. Sometimes lenders don't even do that. This got the banks into trouble. They wound up with toxic assets of dubious value on their balance sheets.

It seems that this depersonalization goes to the heart of the global financial crisis. In finance, it's sometimes referred to as the "principal-agent problem." It means looking at numbers instead of people.
posted by up in the old hotel (80 comments total) 15 users marked this as a favorite

 
So essentially we gave the banks billions in beer & titties money?
posted by crapmatic at 12:50 PM on October 30, 2008 [3 favorites]


As I understand it, the Europeans have injected capital into banks on the condition that the banks use it for loans. The Americans have injected capital into banks while straining to look the other way and saying "No, of course we're not going to tell you what to do with the public's money! That would be socialism!"
posted by East Manitoba Regional Junior Kabaddi Champion '94 at 12:56 PM on October 30, 2008 [19 favorites]


That's a lot of beer. And titties.
posted by rokusan at 12:56 PM on October 30, 2008


Come on, they might buy blow with it too.
posted by chunking express at 12:56 PM on October 30, 2008 [4 favorites]


Well, as long as twenty or so people get eight figure bonuses out of all this we'll be able to say it was worth it.
posted by The Straightener at 12:57 PM on October 30, 2008 [1 favorite]


OH NO THEY DINNIT!
posted by educatedslacker at 12:59 PM on October 30, 2008


I don't understand why the Government wants banks to buy each other.
posted by stbalbach at 1:01 PM on October 30, 2008


Whatever, some years ago I went to get a credit card or an auto loan or something from my small local credit union. I'd had the account forever, had loans with them in the past, great history. They told me flat out that nothing I'd done with them mattered, they looked at my third-party score and only my third-party score.

We've long since moved into the age of automated interlinked blacklists. There's no way around that system.
posted by vsync at 1:02 PM on October 30, 2008 [1 favorite]


Less banks mean it is easier to just absorb the whole banking industry into the state.
posted by TwelveTwo at 1:02 PM on October 30, 2008 [4 favorites]


Will somebody step into this thread and explain to me how this is all just paranoid hand-waving? Please? 'Cause I'm about this close:

-> <-

to putting my savings in Molotov Cocktails futures.
posted by lekvar at 1:03 PM on October 30, 2008 [5 favorites]


To reduce their ATM surcharges from using banks they don't have accounts at? That would be my reasoning for re-arranging the landscape of one of the nation's largest industries, should I ever do that.
posted by stupidsexyFlanders at 1:05 PM on October 30, 2008


If all the banks keep merging they'll be too big to fail. Problem solved [slaps hands together with the satisfaction of a job well done].
posted by adamrice at 1:07 PM on October 30, 2008 [3 favorites]


I heard on NPR that they were just parking it in the Fed's interest bearing accounts.
posted by cjorgensen at 1:07 PM on October 30, 2008


Bailoutsleuth
posted by Thorzdad at 1:07 PM on October 30, 2008 [2 favorites]


You have this story. You have stories like these. Can you understand how this look like the banks created this problem, and now are recieving unprecedented, unneccessary handouts from a colluding Bush administration? How is this not a raid on the treasury of the future? It smack of a last-minute grab-the-money-and-run raid.
posted by BeerFilter at 1:13 PM on October 30, 2008 [5 favorites]


I heard on NPR that they were just parking it in the Fed's interest bearing accounts.

No, see the money was just resting in that account before I moved it to another account.
posted by WinnipegDragon at 1:14 PM on October 30, 2008 [6 favorites]


Father TED Spread?
posted by East Manitoba Regional Junior Kabaddi Champion '94 at 1:15 PM on October 30, 2008 [1 favorite]


I don't understand why the Government wants banks to buy each other.

In Canada the government has the beat the banks with a stick to keep them from buying each other. If the banks had their way there'd only be two banks in the whole country. Maybe not that many even.
posted by GuyZero at 1:16 PM on October 30, 2008 [1 favorite]


Many small banks reimburse you for the fees involved in using other banks' ATMs. In some ways it's unfortunate that they have to do this, but this is how they stay competitive with the larger ones.

On the general question of why the Federal government seems to be implicitly giving the go-ahead for this, I think it's because centralization begets centralization. People who work for the Federal government are probably comfortable with the idea of One Massive Bank that they can regulate rather than lots of little banks that may or may not respond to them.

I've met quite a few people in government, both elected and in the civil service, who seem to want one entity that they can deal with for each industry. One number that they can call in order to speak with The Airline, another to speak with The Software Company, and another for The Bank. It would make their jobs a lot easier. (Not everyone I've met who's involved with the Federal government is like this, but quite a lot of people are, or seem to demonstrate more or less unconsciously that they think it'd be really convenient.)

Combine the "get big or get out" mentality with regulatory capture by dominant players, and it's not hard to see how you can slide into an oligopoly pretty easily.
posted by Kadin2048 at 1:19 PM on October 30, 2008 [4 favorites]


> How is this not a raid on the treasury of the future? It smack of a last-minute grab-the-money-and-run raid.

Rob a liquor store for a few hundred bucks, and you get ten years in prison. Raid the treasury to the tune of hundreds of billions of taxpayer dollars, and you get a business school named after you somewhere.
posted by The Card Cheat at 1:20 PM on October 30, 2008 [12 favorites]


And you'll be interested to know that A.I.G. has spent $90,000,000,000 of the $123,000,000,000 we loaned it; "has declined to provide a detailed account of how it has used the Fed’s money"; and its internal auditor "has resigned and is in seclusion".
posted by nicwolff at 1:38 PM on October 30, 2008 [8 favorites]


I wrote this in my blog when the bailout was first being discussed:

This is the economic equivalent of September 11th. An emergent situation that people are afraid of occurs, then the administration uses that fear and time of uncertainty to request sweeping powers to "contain" that emergent situation.

And then they scam us out of what's ours, and we take it.
posted by SaintCynr at 1:39 PM on October 30, 2008 [3 favorites]


There is simply no way to prevent this from happening, is there? I mean, as a citizen, I can call my elected fuck-up all that I want and it won't prevent the scumbag from letting the rich steal my tax dollars, will it?
posted by maxwelton at 1:43 PM on October 30, 2008


Urge to kill...rising.
posted by kirkaracha at 1:44 PM on October 30, 2008 [1 favorite]


I've always maintained banks were merely legalized theft. This seems to be taking my hyperbole a little too far.
posted by Dark Messiah at 1:50 PM on October 30, 2008


We need a Defense of Mortgage Act, to make sure that Mortgage is forever defined as between a bank and a homeowner. A bank and another bank is just unnatural and weird. I mean, they've got their hands in each other's vaults and everything.
posted by dhartung at 2:01 PM on October 30, 2008 [28 favorites]


"In seclusion"? What the fuck does that mean? Is he afraid for his life?
posted by boo_radley at 2:03 PM on October 30, 2008 [2 favorites]


In Canada the government has the beat the banks with a stick to keep them from buying each other. If the banks had their way there'd only be two banks in the whole country. Maybe not that many even.

As the PM of the time asked rhetorically in his let-us-say noticeable French Canadian accent, "Would I be a better prime minister if I were three-hundred fifty pound?"
posted by ricochet biscuit at 2:08 PM on October 30, 2008 [3 favorites]



And yet half the voting public will dutifully march off to the polls and vote for more of the same.

And no, I am not sure Obama won't pull the same crap. But I AM sure it will happen again with more republicans running the country.
posted by notreally at 2:09 PM on October 30, 2008


boo_radley: Probably advised by his lawyers to keep shtum before the possible criminal trial...
posted by PenDevil at 2:09 PM on October 30, 2008 [1 favorite]


So, can we start rioting yet? Or will the voices of "reason" come by to pat us on the head and tell us that *OF*COURSE* that's what the banks are doing because its the best thing for us poor little economic ignoramiouses and if only we were smarter we'd know that?

'Cuz I'm thinking its time to take to the streets with pitchforks and torches. Or maybe start a co-op to hire hitmen? I mean, surely a professional assassin wouldn't charge much more than $5,000 to take out an AIG board member, right? There's eleven members of the board, that comes to only $55,000 for the whole lot of 'em? Hell, we might be able to find someone to give us a package deal.

Ok, so I'm joking, but I think its at least time to start some massive protests.
posted by sotonohito at 2:13 PM on October 30, 2008


What? It was a scam peddled to us by liars? Who ever could have seen that coming?
posted by rusty at 2:19 PM on October 30, 2008 [1 favorite]


Don't be so quick to say you're joking, sotonohito. Yes it's reprehensible, but when dealing with even more reprehensible people who can exploit your unwillingness to "go there", you'll be treated as a punk. And can you blame them? Obscene gobs of cash as the reward, and virtually no risk- the only reason you don't make the same decision is because you aren't in a position to do so. I happen to think that putting that "risk" side up a few notches, say by kidnapping a few board members a la "The Clearing", torturing them "Guantanamo style", etc., would curb some of these behaviors. Sure it would certainly end YOUR life, so it would be a sacrifice, and decried as "evil" and "terrorist", blah blah blah... but man would those headlines reign in some corporate excesses or WHAT?!

These people treat the American population as punks because they never push back. It's like AIG steals our lunch money every day at recess, and until we trip them and kick dirt in their faces by the swingsets, they'll keep doing it. There are kinder, gentler ways to do that, but that doesn't mean having a few loose cannon nutjobs to remind those who would prey on the American population that they'd rather do it the straight and legal way is necessarily a bad idea. The alternative is due process, but unless a proper conviction carries penalties up to and including death, then it's toothless and pointless.
posted by hincandenza at 2:24 PM on October 30, 2008 [2 favorites]


Hmm. Regional banks that didn't screw up will now have the option of getting bought out or having to compete with new national banks flush with taxpayer money that they got by screwing up. Man, I have no head for economics and high finance. Is that how it's supposed to work?
posted by moonbiter at 2:28 PM on October 30, 2008 [1 favorite]


> ...surely a professional assassin wouldn't charge much more than $5,000 to take out an AIG board member, right?

I don't by any means advocate for this either, but I'm frankly surprised from an academic standpoint that it hasn't started happening, both in the corporate world and the world of the more accessible public servants. I generally figure that if I, being the reasonable person that I am, nonetheless manage a sense of loathing and outrage for some of these people and their beyond-criminal actions, then how many unhinged detractors must exist who think that the time has come for much more extreme action to be taken? Think John Allen Muhammad, but less random.

It's a scary thought, to be certain.
posted by Brak at 2:33 PM on October 30, 2008 [1 favorite]


>>Obscene gobs of cash as the reward, and virtually no risk- the only reason you don't make the same decision is because you aren't in a position to do so.

I take issue with that. There are plenty of us who really want the world to be a fair, just, and free place that doesn't include screwing others to help yourself. Call me a chump, a dreamer, naive, whatever you want to, but no, I would not make this same decision, and I know of at least a few people who wouldn't.

You can't fairly get pissed about someone else destroying the system if you yourself would do the same damned thing.

"No crime is greater than approving of greed" - Tao Te Ching, chapter 46
posted by SaintCynr at 2:38 PM on October 30, 2008 [5 favorites]


hincandenza asserted:
"Obscene gobs of cash as the reward, and virtually no risk- the only reason you don't make the same decision is because you aren't in a position to do so."

Nuh-uh, not me. And I've been at a crossroads of opportunity before, so I know of what I speak.

Many more are just like me - they don't feel comfortable bankrupting their community, their neighbours, their friends and family, in order to get an intensely short-term advantage over others.

Whatever is broken in the brains of those who think any chance at any dollar justifies any decision they can conceive of no matter who it harms...I hope they find the cure for it someday. It's more of a detriment than all of the other "cause of the day" mental illnesses they're throwing our way.
posted by batmonkey at 3:03 PM on October 30, 2008 [3 favorites]


...surely a professional assassin wouldn't charge much more than $5,000 to take out an AIG board member, right?

I don't by any means advocate for this either...


I will. Seriously. When people act as untouchable, greedy, and callous as this...well...I begin to think that physical violence is, perhaps, the only recourse left that might actually register to them.
posted by Thorzdad at 3:08 PM on October 30, 2008


My brother sent me this picture around the time the bailout was being debated.
posted by Killick at 3:17 PM on October 30, 2008


OH NO THEY DINNIT!

Oh No You Didn't
posted by SheMulp AKA Plus 1 at 3:19 PM on October 30, 2008


Wow thanks Thorzdad, now we're all known associates of a radical supporter of domestic terrorism
posted by East Manitoba Regional Junior Kabaddi Champion '94 at 3:26 PM on October 30, 2008 [2 favorites]


“I mean, surely a professional assassin wouldn't charge much more than $5,000 to take out an AIG board member, right?”

You could get a meth-head in a pickup truck for that. A professional contract hit on that order would be 300k at the very least. (emphasis on professional). Cheaper as a DIY thing of course. But you’re not paying for the killing, your paying for the quiet.

But I am, for the first time in my life, seriously contemplating running for office just so I can go after fucks like these.

It’s not as simple as killing them. Take the guy in seclusion who:"has declined to provide a detailed account of how it has used the Fed’s money"

Castles.
I was watching something on castles the other day. They were built really high, thick stone walls, all that. And they dominated the countryside.

Why don’t we have them anymore?
Well, the strategic answer is that mobility and gunpowder altered the face of warfare.
Which is true.
But it is also true that the method of aquiring and maintaining wealth has changed.

What then are the modern castles? Where are the strongholds? They’re more conceptual in nature.
Think you’re going to be able to reach, say, Martin Sullivan?
Ok, even if you do - it’s not going to free his wealth. Or change the ‘feudal’ system (to extend the metaphor).
As I understand it Robert Willumstad took over as CEO in June anyway.

Sure, spilling some blood sends a message.
So did storming the castles which happened from time to time.

The people who lived just built thicker and higher walls.
Far be it from me to disparage clipping some assholes and saving the human race a lot of trouble.

But - I suspect the modern reaction would be to build the walls higher.
Problem is now that the castles are hard to see. They’re laws. They’re distance.

Wealth - instead of being in grain and in the land is in ephemeral and nearly instantaneously mobile electronic form.

Hell, why do you think it’s so hard to travel around right now? Even domestically?
Part of the castle.

Castles weren’t just for external defense. Indeed, not even mostly. They were built for regional control (and sometimes offensively - william the conquerer - first thing he did when he hit ground was force - that is, by sword, spear, etc-point, force - local folks to build him a Motte and Bailey).
Think about it - who lived in them?

So they were for oppression and exploitation of the populace and the subjugation of other nobles.

Sound familiar?
What’s goin’ on now with the mergers?


So the objective of knocking off a few stuffed suits - ok, but it’s not going to achieve the goal of dismantling the apparatus of economic domination.

For that you need seige engines. What the modern equivalent would be there I don’t know.

I do know we have a lot of people with firearms who serve (ostensibly) at the will of the people.
No reason we can’t take the money back.

But that presumes no betrayal by our leaders and - given that - no successful violence on their part.

Just giving you the sitrep there.
What you yourself might want to do about it is your thing.

Organization and involvement takes a lot of time and sacrifice.
Surprisingly so does killing well. But I think the former is more efficacious in terms of lasting effect.

If violence is necessary to achieve a goal, so be it, but define the goal first. Then move to the particulars.
At the very least if killing someone is absolutely necessary it will be the right person to end the seige and storm the castle.
Killing isn’t like some magic spell that will fix everything. Hell, it might not fix anything. And odds are it will make things much worse.

As I said - bigger walls. At least.
posted by Smedleyman at 3:41 PM on October 30, 2008 [22 favorites]


“Obscene gobs of cash as the reward, and virtually no risk- the only reason you don't make the same decision is because you aren't in a position to do so.”

Asked why it was dishonorable to return without a shield and not without a helmet, the Spartan king, Demaratos replied: “Because the latter they put on for their own protection, but the shield for the common good of all.”
posted by Smedleyman at 3:59 PM on October 30, 2008 [2 favorites]


banks are asset stripping goverment. what else was left really?
posted by breakfast_yeti at 4:12 PM on October 30, 2008


I don't get the problem with this. The bailout money was to strengthen the banks balance sheets, more capital reserves. Banks can lend say $10 for each $ of capital. They can use the capital to buy bank deposits to do this as well as lend the capital itself. Its a way to gain strategic advantage and market share along with the deposits. Good business if you can find a suitable target. Banks core business is lending, so I wouldn't expect that we will see reticence to lend for very long. Also, isn't the extension of credit what got us into this? Last thing we need is more lending to sooth the unwashed masses...
posted by sfts2 at 4:15 PM on October 30, 2008


Hank Paulson will end up being the Andrew Mellon of the 21st century (liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate!). His incompetence, or rather intransigence, in the face of economic crisis will become legendary.

He has resisted doing the right thing every step of the way and has had to be dragged kicking and screaming just to get even the weak actions so far. In other countries (UK, Sweden, for example) they don't just hand out bailout money. They take over the banks, fire the managers and put in their own management. They don't ask or beg the banks to lend. They tell the banks what to do because they run them. And once the crisis is past and the banks return to profitability, they sell them back to investors, making a tidy profit. Paulson is too busy protecting the privileges of his buddies on Wall Street to save the economy. Like Mellon, he still can't believe that free market capitalism is incapable of saving itself.
posted by JackFlash at 4:20 PM on October 30, 2008 [6 favorites]


Wow thanks Thorzdad, now we're all known associates of a radical supporter of domestic terrorism

I am not a radical!
posted by Thorzdad at 4:30 PM on October 30, 2008


stfs2: Why should taxpayers subsidize bank consolidation? Small banks that may be relatively healthy are now ripe for the picking.
posted by up in the old hotel at 5:21 PM on October 30, 2008 [1 favorite]


Please note that Obama campaign and McCain campaign both got a lot of money from the very outfits that we are bailing out.

My simple solution: companies that go under. Let them sink. If some must be kept floating: nationalize. Now we have the auto outfits asking not for new bailout money but a piece of what has been assigned to bailout.

In fact both parties have been guilty of systematically ridding the nation of regulations, though the GOP seems a bit more aggressive in so doing.

We have the very model during the Great Depression: even while the FDR administration was attempting to save the economy, business leaders on the Right were saying the govt should stay out of things, or, as soon as possible, get out, since business was the way to handle things and not govt. Now we have (again) the temporary intrusion of govt (using our money) and business already using the money for their own purposes rather than for what it was intended to be for.

Obama says he will see that the taxpayers get the money back. I doubt this will be the case.
Or they will get 10 cents on the dollar back.
posted by Postroad at 5:40 PM on October 30, 2008


I'm always surprised the ultra-wealthy don't use assassination more.

Take Mugabe, for instance. The man is pure evil. The world is better off without him. And it surely couldn't cost more than chump change to have him put down. Why hasn't that happened?

Or Paulson, for that matter. He's responsible for the loss of trillions of dollars. Many ultra-wealthy people have lost fortunes because of his idiocy and corruption. It might cost a bit more to have him popped but, hell, why not? He's cost ya $100 million of personal wealth: what's another half-mill to get revenge? Not to mention the salutary effect it would have on future investment security. Hell, the cost would pay itself back ten-fold within a year.

It's probably just as well that I'm not wealthy.
posted by five fresh fish at 5:50 PM on October 30, 2008


I'm not defending this, honest. But the history of M&A, especially bank M&A, shows that the guys who get bought (in this case, the healthy regional banks) get the spoils, and that the acquirers overpay. Maybe this time it's different, but of all the crisis-related maneuvers, this is one of the least egregious.
posted by Kwantsar at 5:55 PM on October 30, 2008


up in the old hotel sez "Why should taxpayers subsidize bank consolidation? Small banks that may be relatively healthy are now ripe for the picking."

Isn't this more a question regarding the actual bailout itself, as opposed to the question regarding the use of the bailout money proceeds? It arguable, but this isn't the thread to derail with that. My point would be only that while acquiring banks may be an indirect use of the bailout money versus directly lending the proceeds, but its not that indirect, and is probably a smarter business move from the banks standpoint because they not only get the deposits, but also local presence, branches, etc. Again, the banks will lend pretty soon, its only been a couple of weeks, and its how they make their money. This is much ado about nothing.

If you are worried about consolidation, well, I can see that, but I think there are something like 9000 banks in this country.
posted by sfts2 at 6:03 PM on October 30, 2008


The bailout money was supposed to be used to increase the liquidity pool, allowing banks to meet their existing obligations and extend credit to companies and individuals that rely on credit to continue operations. The money was not supposed to be used in acquisitions.

Here's a rough analogy: A college student gets his loan money through his school's Financial Aid dept., but promptly spends it on whores and opium before paying for his classes or books. Distraught, he calls his parents and tearfully begs for enough money to cover his ass before he gets booted out of school. His parents wring their hands and make a lot of noise about financial responsibility but eventually fork over the cash to keep their son in college for the semester. First thing he does, though, is buy an Xbox, a 50" plasma screen, and a qp of weed.
posted by lekvar at 6:34 PM on October 30, 2008 [4 favorites]


It seems that this depersonalization goes to the heart of the global financial crisis. In finance, it's sometimes referred to as the "principal-agent problem." It means looking at numbers instead of people.

This isn't quite the principal agent problem. Although you're right it is an problem of imperfect information, the germ of this "problem" is misaligned interests of the principal and an agent. A fine example might be as follows: a government (the "principal") has capital, and wishes to stave off recession by making sure loans are available to businesses. The task of making individual loans available is too enormous for the government, so instead it gives the capital to banks (the "agents") in the hope that they will lend it out. Unfortunately, in this case, the banks do not feel that lending more is the most profitable use of the government's capital, and would rather spend it on acquisitions (or, of course, hookers and blow). Naturally, the more the government's and banks' interests coincide, or the more government can constrain, monitor and contract on the banks' actions, the less inefficiency. (The article makes a good case the Treasury is actually quite keen on consolidation, but I'm just illustrating the basic economic theory.)
posted by ~ at 6:38 PM on October 30, 2008 [1 favorite]


Eh - just to clarify - the rambling above is my bad attempt to explain the textbook "principal agent" problem, not the banking crisis. (Which, despite ongoing doctorish studies in economics, I have no understanding of.)
posted by ~ at 6:44 PM on October 30, 2008


lekvar,

Says who? It certainly wasn't in the bill's language...I think you have this expectation, but there is nowhere where this was said, and believe me I watched those hearings and discussion throughout in detail. I may have missed this I guess, but it doesn't strike me as having been said or implied.

Your whores example is completely offbase. Its more like the guy getting money to buy books, and instead he spends it on a laptop and internet access to the books. He gets not only some benefits which can cause outrage, such as looking at porn and downloading music, but he also gets the same information and well as other studies reinforcing capabilities as well.
posted by sfts2 at 6:47 PM on October 30, 2008


Well, it is a rough analogy. To be honest, it's based of what I've read here and heard on the radio. I haven't read the text of the text of the bill; to be honest I'm hardly qualified to make heads or tails of the legalese involved.

If you have a more nuanced explanation of what the bill was supposed to achieve, I'd certainly appreciate any links you'd care to share. <- No sarcasm.

But I stand by the "whores and opium." I don't see that tying the cash they've been given to acquired assets is going to do anything in the short, or even medium, term. If the cash is tied up it won't be available for inter-bank loans.
posted by lekvar at 6:53 PM on October 30, 2008


sfts2 says: Says who? It certainly wasn't in the bill's language...I think you have this expectation, but there is nowhere where this was said, and believe me I watched those hearings and discussion throughout in detail.

"This program is designed to attract broad participation by healthy institutions and to do so in a way that attracts private capital to them as well. Our purpose is to increase confidence in our banks and increase the confidence of our banks, so that they will deploy, not hoard, their capital. And we expect them to do so, as increased confidence will lead to increased lending. This increased lending will benefit the U.S. economy and the American people."--Henry Paulson
posted by up in the old hotel at 6:56 PM on October 30, 2008 [1 favorite]


All I have to say to everyone is this:

I Told You So.
posted by tgrundke at 7:04 PM on October 30, 2008


The guys at the top don't off each other because farming the poor is a gentleman's game. It wouldn't be proper.
posted by seanmpuckett at 7:12 PM on October 30, 2008 [2 favorites]


A college student gets his loan money through his school's Financial Aid dept., but promptly spends it on whores and opium before paying for his classes or books. Distraught, he calls his parents and tearfully begs for enough money to cover his ass before he gets booted out of school. His parents wring their hands and make a lot of noise about financial responsibility but eventually fork over the cash to keep their son in college for the semester. First thing he does, though, is buy an Xbox, a 50" plasma screen, and a qp of weed.

When this happened to me, i only got to skate by until the end of the school year, and then I had to go home for summer break, and explain myself...

"Well, you see, Dad, it's like this...I've discovered that what I really want to do with my life is smoke weed, play Madden football and watch Days of Our Lives. College is the only place you can do this and still get laid"

The following fall I was living at home, going to a state school, and working nights at UPS to pay for books. If only I could have convinced my parents that my irresponsible behavior was just training for a career in banking, I might have got away with it for a little longer.
posted by billyfleetwood at 7:31 PM on October 30, 2008 [1 favorite]


Krugman on Paulson. The banks are doing exactly what Paulson wants them to do.
posted by neuron at 8:24 PM on October 30, 2008


The ultra-wealthy are doing exactly what they want to do: loot the remainder of America's wealth.

If you don't have tens or hundreds of millions of dollars in personal wealth, you are prey.
posted by five fresh fish at 9:14 PM on October 30, 2008 [1 favorite]


up in the old hotel - I've seen that statement, I just don't think it implies what you seem to think it implies. Acquiring deposits strengthens the ability of a bank to lend because it has more capital reserves, which allow it to sustain non-performing loans without regulatory violation. I think that a) acquiring less leveraged banks is a perfectly acceptable use of capital because it increases the banks ability to lend and has strategic benefits b) the TARP money will take time to work its way through the system, just give it time, its already starting and lending is the only way banks can make money c) the last thing this economy needs is indiscriminate borrowing - its what landed us here to begin with.
posted by sfts2 at 9:30 PM on October 30, 2008 [1 favorite]


And neither one of the guys running for president has mentioned this, or anything close to this, because neither one of them would dare to stand in its way.

Meet the new boss, same as the old boss.
posted by paisley henosis at 9:43 PM on October 30, 2008 [1 favorite]


The term "toxic assets" drives me nuts because it's a term that carries absolutely no sense of responsibility. "Toxic" is a scientific/medical term, not a sociological or financial term. As a result, it tends to come across as neutral, whereas we should be looking for a term that will help us remember why this happened, how it affected our society/economy, and that we should try to avoid the same causal behavior in the future. Compare "toxic asset" with "Social Security." In the U.S., "Social Security" describes exactly what the program provides.

At some point, somebody determined (rightly or wrongly - mostly wrongly it turns out) that these loans were good and had value. Same thing for Credit Default Swaps and all of the other financial instruments affiliated with this disaster. Obviously, we now know this not to be the case. Why? Because somewhere, at least one or more of the decision makers involved in the system, from homeowner to broker to Wall Street banker, made a bad decision. Those bad decisions were anywhere from a homeowner thinking he/she could afford more house than realistic, to brokers coaxing/defrauding the borrower into taking a note with bad terms, to Wall Street alchemists who tried to turn debts into assets or who leveraged themselves into oblivion. Or, all of the above.

My preferred term is "corrupt" and here's why: Corrupted Assets.
posted by webhund at 9:48 PM on October 30, 2008 [1 favorite]


the TARP money will take time to work its way through the system

To "trickle down", as it were.

Yeah, it smells like pee, but that's a glorious golden shower of wealth trickling down onto you.
posted by dirigibleman at 10:48 PM on October 30, 2008 [1 favorite]


So the moral of this story is hazardous?
posted by fullerine at 2:31 AM on October 31, 2008


Ex-CEO says AIG running out of time to be saved
Maurice "Hank" Greenberg, the former American International Group Inc chief executive, says the terms and conditions surrounding a government rescue loan are pushing the insurer closer to collapse with each day.

"Time is clearly running out," said Greenberg in a letter on Thursday to current Chief Executive Edward Liddy that was filed with the U.S. Securities and Exchange Commission.
posted by PenDevil at 3:28 AM on October 31, 2008


Praying at the Golden Calf
posted by PenDevil at 3:32 AM on October 31, 2008


The time to protest was before the vote on the bill. I went down to Capitol Hill that Saturday, with my cardboard "Nationalize" sign. It was really crowded - for the annual book fair. Of the people who spoke to me, only a few got it; several asked "nationalize what?" I made my way up to the capitol, and there were about a dozen protesters, including a guy wearing a "9/11 was an inside job" tee shirt. Since I was tromping around the mall solo, I called it the "one man march". Other cities got it together, but it was short notice: we got blindsided. BTW - this was supposed to be an emergency, so why is there all this time to fool around with M&A deals? The recession, and layoffs, are rolling out while the banks sit upon mountains upon mountains of cash.

As for the castle analogy - the archers are the press, but maybe that should be the blogs. Foot soldiers would be hackers. Why hasn't the bailout been hacked? I guess that would require hackers with some degree of awareness and concern.
posted by AppleSeed at 4:26 AM on October 31, 2008


Praying to the Wall Street brass bull is so freakily anti-God's-commandment that I'm simply stunned. I mean, shit, God bitch-slaps his chosen people right there and then, as Moses brings down The Commandments: it's not like the golden calf story is tucked away in some obscure corner of the bible. You can't freakin' miss the false idols lesson.

And yet, there they are. If God strikes down America, I think all y'all can point directly at the idiots praying to the bull market.

And neither one of the guys running for president has mentioned this, or anything close to this, because neither one of them would dare to stand in its way.

And also because both of them want to be elected. Post-election decisions will tell the real truth.
posted by five fresh fish at 6:24 AM on October 31, 2008


Concerning the praying at the bull:

Not only did I expect immense amounts of lightning...

Not only did I get more goddamn evangelists in the financial district afterwards...

But they didn't even pray at it right! EVERYONE knows that the Brass Bull's luck charm only works if you rub the bull's nuts! THEY WERE AT THE WRONG END!

Evangelijerks, go home.
posted by mephron at 6:47 AM on October 31, 2008


Ah, perhaps you're right. Frank saying it violates terms. We'lll see, but I still don't see what the big deal this far into it.
posted by sfts2 at 7:02 AM on October 31, 2008


^is this far into it.
posted by sfts2 at 7:03 AM on October 31, 2008


The Bush gang's parting gift: a final, frantic looting of public wealth.
posted by BeerFilter at 7:20 AM on October 31, 2008 [1 favorite]


I am pissed off but not surprised. The way this government has been run so far:

1). Give super rich banking companies get plenty of tax breaks/low rates with no mandate on what to spend the tax break money/super low federal interest rates on. Just assume that they are responsible adults and they will use it to better society. Super rich companies keep the tax breaks/money saved and throw huge parties for the top 5%. No new jobs are created. People suffer.

2). Drop import taxes so it is cheaper for super rich manufacturing companies to move overseas. Again just assume that they are responsible adults and they will use it to better society. Super rich manufacturing companies keep profits and throw huge parties for the top 5%. People loose jobs, can't pay Super rich banking companies their loans.

3). With the loss of jobs, no one can pay their loans. This creates toxic assets. Super rich banking companies loose cash. No huge parties for the top 5%. They whine to the government to bail them out using the now jobless tax payers (it seems like we are the only ones who are actually paying them!) tax dollars.

4).l Government agrees and gives super rich banking companies plenty of cash and yet again they give no mandate on what to use it for. Now normal people would think NO, but our president and people around him, I guess never heard of the quote "fool me once shame on you, fool me twice shame on me." Yet again they just assume that super rich banking companies are responsible adults and they will use it to better society. Huge parties thrown for the top 5%. >:>(

Again this does not surprise me that this has happened. It is Capitalism! YIPPEE! If you earn it, you keep it! It, in fact, is the American dream to be super rich and shit on everyone else. Screw the poor right? All you other countries in the world are WRONG! Socialism and government interference with super rich people is wrong. How dare we as a government and society DARE to tell them how to spend their money. GOD....

This is the way the government has been set up for the last 8 years. Rich helping the rich. I swear this is the biggest robbery in the history of the world. We all saw it. Yet were we all that powerless to stop it?

Torches and pitchforks.... people..... Torches and pitchforks.

Sorry for the rant.... this just seriously pissed me off.
posted by Mastercheddaar at 8:30 AM on October 31, 2008 [1 favorite]


I don't know what an elected president can do before taking office, officially, but it would be just super awesome if Obama would spend the next two months -- with the people's mandate he'll receive -- raising bloody hell about all of this shit. I, personally, would like to see George W Bush impeached just before he leaves office -- please, because the door should hit him and all his cronies on the way out.
posted by seanmpuckett at 8:07 AM on November 1, 2008


Praying at the Golden Calf

um...I think god said to NOT do that...
posted by SheMulp AKA Plus 1 at 12:25 PM on November 1, 2008


Federal Reserve Hires Bear Stearns Fox to Fix the Hen House
posted by homunculus at 7:05 PM on November 6, 2008


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