"Perhaps their criticism is that we dare to do math?" (Podcast)

August 21, 2009 2:48 AM

Glenn Greenwald / Neil Barofsky

Hey! Can you tell us what they did with the money?

"Many banks were concerned about business-sensitive information and requested confidentiality of individual survey responses. Accordingly, pursuant to our legal obligations, SIGTARP is unable in this report to attribute any results or comments to a specific institution. However, SIGTARP is in the process of evaluating recipients’ claims of confidentiality and will provide copies of the individual responses that will include information provided by the banks to the maximum permitted by law. SIGTARP plans to post the responses, redacted as necessary, on its website within 30 days."

Previously.

posted by RoseyD (21 comments total)

heh... so the guy says the bailout "may cost up to 27.3 trillion $$$'s", and the interviewer says "I didn't know 27.3 $$$'s existed" and they guy says "It may not..." and I got real confused at that point and figured the whole damn mess is fictional!
posted by HuronBob at 3:38 AM on August 21

Transcript?
posted by ardgedee at 5:34 AM on August 21

Shenanigans. May cost the taxpayer $27.3 trillion? Or, to put it another way, may cost the taxpayer one-and-a-half the entire US economy? (In 2008 our GDP was $14T. World's was $70T.) 40% of the world economy, of which US output is only 20%? That makes no sense. (PDFs on size of global economy here, via the World Bank).
posted by Diablevert at 5:57 AM on August 21

Is the $27.3T figure some kind of pseudo-grand-total for the total amount of money spent? TARP is structured in a revolving fashion; Treasury spends $700B on crapola, and then tries to sell off the crapola, and any money thus made goes back into the bucket for more crapola-purchasing.

I don't get what is meant by coupons; how do those represent income for Treasury? This must be where the real screw-everybody magic kicks in, right?
posted by Rat Spatula at 6:10 AM on August 21

The economy is a large pool of water. Our economy can only hold so much water(money). Normally we are all swimming around in the pool and not bumping into each other. Then you enter really really rich people with sponges. Throughout the years they have been absorbing our economy to the point where we have about a foot left. If you want to fix the economy make these tight wad rich assholes spend good and plenty instead of hording it.
posted by Mastercheddaar at 6:31 AM on August 21

RS - Coupons is just bond-speak for regularly scheduled payments. For mortgage backed securities, this means mortgage payments (generally monthly payments of principal and interest, less defaults, plus prepayments).
posted by hue at 6:32 AM on August 21 [3 favorites]

It is not possible to remove money from the economy except by taking the cash and stuffing into a mattress. Rich people hoarding money in banks or even hedge funds means the money itself is being used to finance businesses, construction, and large purchases.

And yeah, the 23.7 trillion number is pseudo fiction. Last year the number 55 trillion was being bandied about in certain circles. The number isn't pure fantasy, but it sure does mean counting a lot of that money more than once.

Imagine taking a million dollars and all the banks pass it around to each other a million times instantly, electronically. Shazam! Big volume in a single day! Magic!
posted by Xoebe at 7:01 AM on August 21

Rich people hoarding money in banks or even hedge funds means the money itself is being used to finance businesses, construction, and large purchases.

I was under the impression that this USED to be true, but hasn't been so much recently because all the banks which are holding all that "rich person money" are now unwilling to provide credit for said businesses, construction, and large purchases.
posted by hippybear at 7:22 AM on August 21

RS - Coupons is just bond-speak for regularly scheduled payments.

Okay, sure... they buy a crappy mortgage, they become the holder of the crappy mortgage, therefore they collect the payments (or foreclose, or just settle, or something).

So again, the $27.3T number is supposed to mean "the amount of money TARP will end up spending, while not actually being more than $700B in the red at any one moment".

I wish the government would pay me scads of money to stop doing this job I'm doing. I'm tired of doing it. It's really hard and things aren't going well and I don't want to think about it any more.
posted by Rat Spatula at 7:42 AM on August 21

As I understand it, the $23 x10^12 number is the amount guaranteed, that's if every loan defaults and the property is worthless. Which, is maybe not so impossible, mortgage defaults are still rising.

And as to taking money out of the economy, how about adding it? In the NYT, about what a great job Bernanke is doing:
But economists say Mr. Bernanke’s most important accomplishment was to create staggering amounts of money out of thin air.
posted by 445supermag at 7:55 AM on August 21

Rich people hoarding money in banks or even hedge funds means the money itself is being used to finance businesses, construction, and large purchases.

The problem is that all the "hoarded" money is spent much more discretionarily. Think of this way: Give money to 20 million people and a great deal of that money will be spent out of necessity - mortgages, groceries, electricity, etc. Give the same amount of money to 20 banks or corporations, and they can sit on alot of that money until they can get good leverage for that money. More money just equals a bigger hammer; they use that money to get better deals and the better deals lead to more money. Vacuum cleaner, anyone?

The income gap in this country is the widest it has been since 1928. Our servile admiration of big business will destroy us if things don't change.
posted by Benny Andajetz at 8:02 AM on August 21

But in the real world, if every loan defaults and every property is worthless, then no one has a house and no one has a job, and the US economy is producing zero dollars. And that does not happen.

So "$23 trillion dollars" is the financial equivalent of "an object the size of Jupiter could hit the Earth this year." Sure it could. Anything is possible. But you know what? It won't. So let's talk about meaningful possibilities instead, eh?
posted by rusty at 8:04 AM on August 21

What always surprises me about these kind of stories (lack of TARP accountability, AIG / Goldman / BoA bonuses, etc.) is that the 'populist' reaction seems to be: "We need more transparency! We need hearings! These companies should be compelled to be accountable to the American people! More regulation!".

To me, the obvious solution here is that we shouldn't be handing out these funds in the first place. If you're going to throw money at a failing company or industry, you probably shouldn't be surprised when they lose it or waste it.
posted by bbuda at 8:35 AM on August 21

If the government ends up spending 23 trillion dollars on all these programs, the fact that the government just spent 23 trillion dollars would be the least of our problems.
posted by empath at 8:36 AM on August 21

Or, to put it another way, may cost the taxpayer one-and-a-half the entire US economy? [...] That makes no sense.

Are you comparing a total cost over time to a yearly total? Because that also wouldn't make sense.
posted by freebird at 8:57 AM on August 21

This is the problem with fixing credit bubbles. I don't know why we didn't just convert mortgage debt into equity (so you're not left with the binary proposition of default or not). It would have been much more transparent, and I think, a better way to go about this. Right now you're creating sort of an artificial price floor on home equity, caused by keeping the current debt valuation.

Of course the real problem is that banks are going to the fed saying that there's only one way to fix this. Plus you get political ramifications that your house doesn't have a sole equity stakeholder (which is sort of illusionary anyway when you're highly leveraged). And then we end up in situations like this where there's no accountability and it appears that everything went back to the starting point. Hopefully they'll be turning the screws on these banks and enforcing some oversight, even if it isn't transparent. Under Bush the SEC was just sort of rubber stamping and taking 4 hour lunches every day. It looks like now they're starting to get some teeth.
posted by geoff. at 9:15 AM on August 21

> It is not possible to remove money from the economy.

Well, yeah it is (was), sort of. Alot of our "money" was stored as holdings of stocks, bonds, futures, mutual funds. When the stock market tanked, the values of these things all dropped. Bye bye money.

But we need to have a more sophisticated view of the current situation than "teh rich people got all teh money". In our fucked up economy, more emphasis and reward is given to the companies involved in moving money from side to side than to industries and companies that actually make real things or provide real services. The financial industry ponzi-ed itself with CDIs etc in order to keep their profits rocketing up, and they're still on top essentially because they've been sitting on the ball and wouldn't let the game resume (by issuing credit) unless they were bailed out from the losses they created.

OK, the above was hardly more sophisticated, but my point is the financial industry should serve the economy, not the other way around, so the problem won't go away until the financial industry has enough of its fingers broken that it finally loosens its grip on our collective throat.

Hmmm. Colourful but still sophomoric. Ah, fuck it, let's have a revolution.
posted by Artful Codger at 12:28 PM on August 21

This springs inevitably to mind.
posted by IndigoJones at 1:24 PM on August 21

Lest the whole point of this post be missed, if Neil Barofsky said that he would post the data within 30 days, and 30 days have passed with no data being posted, should there not be at least some explaination or modification of the statement? A month ago this sounded like a very interesting prospect because Barofsky had 'pierced the cloud of unknowing' by demonstrating that it was, in fact, doable.
posted by RoseyD at 1:58 PM on August 21

Uh...front inside pocket, white suit, at Fred's Bank.
posted by Smedleyman at 3:10 PM on August 21

Ooops! My bad. The info has been posted :

http://www.sigtarp.gov/audit_useoffunds.shtml
posted by RoseyD at 5:13 PM on August 21