They Saved the Big Banks But Kind Of Lost The Economy Doing It

 By Simon Johnson

It would be easy to take relatively cheap shots at the portrayal of Tim Geithner — “we saved the economy but kind of lost the public doing it” — in the New Yorker, out today

  1. Mr. Geithner is quoted as saying, “Some on the left have fallen into a trap set by the Republicans, allowing voters to mistakenly think that the biggest part of the bank bailout had come under Obama rather Bush.”  Mr. Geithner should know – as he spearheaded the saving of banks and other financial institutions under both Bush and Obama.  In fact, it’s the continuation of George Bush’s policies by other means that really has erstwhile Obama supporters upset.
  2. “I think there are some in the Democratic Party that think Tim and Larry are too conservative for them and that the President is too receptive to our advice.”  Probably this is linked to the fact that Tim Geithner is not a Democrat.
  3. Geithner also suggests that his critics compare government spending on different kinds of programs under President Obama: “By any measure, the Main Street stuff dwarfs the Wall Street stuff.”  This insults our intelligence.  Wall Street created a massive crisis and we consequently lost 8 million jobs; any responsible government would have tried hard to offset this level of damage with all available means.  This includes fiscal measures that will end up increasing out privately held government debt, as a percent of GDP, by around 40 percentage points.  It’s not the fiscal stimulus, broadly defined, that is Mr. Geithner’s problem – it’s the lack of accountability for the bankers and politicians who got us into this mess.

But the Geithner issues reflected here run much deeper.  The New Yorker’s John Cassidy alludes to these but he may be too subtle.  Here’s the less subtle version.

What exactly was the “Geithner stabilization plan” that frames the article – and is the basis for Secretary Geithner claiming to have saved anything?  We are not really talking about the much vaunted but little used toxic asset/loan purchase program (the “PPIP”).  “The plan” here means essentially the stress tests designed by Treasury and run by the Fed – which brought some transparency to banks’ balance sheets, but which also used a relatively benign “stress scenario” (watch commercial real estate, residential mortgages, and credit card losses now unfold).

The main feature of the plan, of course, was – following the stress tests – to communicate effectively that there was a government guarantee behind every major bank or quasi-bank in the United States.  Of course this works in the short-term – investors like such guarantees.  But there’s a good reason we usually don’t guarantee all financial institutions – or act happy when other countries do the same.  Unconditional bailouts lead to trouble, encouraging reckless risk-taking and undermining responsible governance.  You can’t run any form of reasonable market system when some big players hold “get out of bankruptcy free” cards.

All crises end – this is actually Larry Summers’s famous line.  We avoided a Great Depression primarily because, compared with 1929-31, we have a government sector that is large relative to the economy – and which does not collapse when credit goes into freefall.  What exactly did the Obama administration do in ending the crisis that a Clinton or McCain administration – or even Bush – would not have done?  The most plausible answer is: Nothing.

Geithner insists, according to John Cassidy, that the Obama administration has “proposed the biggest regulatory overhaul in seventy-five years.”  This is the worst conceit.  The sad and unfortunate truth is quite the opposite – because Mr. Geithner and his colleagues refused to seize the moment and didn’t break the economic and political power of anyone who mattered, they have doomed us to re-run the same horrible credit loop as before.  Legislation may tweak the details, but the regulation and control of systemic risk remains just as weak as before.

Is the Secretary of the Treasury completely unaware that our biggest banks have become even bigger?  Why does he send out Herb Allison, long-time Merrill Lynch executive, and now an Assistant Secretary to say the US government has “no too big to fail bailout policy,” when this is patently not true?  Why has he reshaped the details of the “Volcker Rules” so they are now meaningless?

In truth, “too big to fail” is not the worst thing we should fear – our financial institutions are now on their way to becoming “too big to save”.  In 1929-30, even if the federal government had wanted to put in place a big fiscal stimulus, it could only have mounted something around 1 percent of GDP; the financial shock of that day was much bigger.  Perhaps monetary policy in the early 1930s could have done more, but today we have already pushed “quantitative easing” (meaning that the Federal Reserve buys junk) beyond recorded limits.  How much do you want to gamble that, next time, the Fed can do enough to save the day without also creating massive collateral damage?

If we continue to allow banks to grow, as they have over the last 30 years – and did again through the latest boom-bailout-rescue cycle – we head towards a day when Mr. Geithner or his successor will try to save the financial system and will fail.

You might think that is a good thing and for sure it will bring on a big change in creditor attitudes and presumably much stronger regulation.  But, just as in the 1930s, first we will have to dig out from under a lot of economic rubble – and we’ll lose a lot more than 8 million jobs.

175 thoughts on “They Saved the Big Banks But Kind Of Lost The Economy Doing It

  1. You might think that is a good thing and for sure it will bring on a big change in creditor attitudes and presumably much stronger regulation.

    Exactly. We had to save the village in order to burn it…

    You seem to have accepted the victory lap policymakers are currently running on having “avoided a Great Depression”. But with the U.S. continuing to run a deficit of 10+% of GDP and the Fed just finishing up printing $1.5 trillion, isn’t that victory lap a little premature? Does anybody really know what will happen when these powerful stimulants are withdrawn?

    No worries, though. As long as central banks can control interest rates across the entire curve — forever — everything will be just fine.

  2. Tim Geithner wrote:

    “ we saved the economy but kind of lost the public doing it” — in the New Yorker, out today.

    In other words, the operation was a success, but the patient kind of died.

  3. A Bush or McCain administration would not have passed the same stimulus package, and likely would have passed something even more heavily weighted toward tax cuts (for the rich, naturally).

  4. I was about to get myself a copy of Cassidy’s latest book. But this morning I came across his piece on Geithner on the New Yorker website… Pretty unbelievable mess of pseudo sophisticated deceitful hoagwash written in the unlikely hope of salvaging poor Tim’s fading glory. Well, I guess I’ll buy Lewis’ book instead, even though I had promised myself not to!

  5. “What exactly was the “Geithner stabilization plan”

    Here it is: “Fasten your seatbelts. It’s going to be a bumpy night.”

    — Bette Davis

  6. From the New Yorker, it also said:
    Americans understand all too well what has happened.

    I believe that is not the case. Other wise people would be following the Financial Crisis Investigation Commission’s social media feeds at the bare minimum to try to learn something. At the bare minimum.

    In my perfect world – financial reform discussions would be on the front page of the paper every day until,as an example, it:

    was illegal to “sell” a client an innovative financial product while simultaneously trying to destroy their client to make more money.

    was illegal to create a naked CDS.

    was illegal to hide trillions off balance sheet.

    was illegal to be fiduciary-ly fraudulent & reckless.

    You get the picture – the public will clearly not understand until their ATM actually doesn’t work that fateful day we came close to having occur in Fall 08.

    Here is an idea to fix what Americans understand:
    We write the financial reform we know we need ala as inspiration.

    My blather about the idea.

  7. Practically anything can be improved by spending $700 billion. The trick is to keep the economy humming while spending as little as possible.

  8. I’m not the biggest fan of Geithner. But, the idea that “they saved the big banks, but lost the economy doing it” is utterly false and ridiculous. I consider myself fairly progressive, but I can’t deal with liberals acting as though it was unnecessary to bail out the big banks. Did certain injustices happen throughout the process of bailing out the banks? Yes. Was it fair to the American taxpayer? No. But, stop attacking the bail out as though it were solely a ploy for Geithner to help his rich friends out. It is just as misleading as all of the crap the right wing throws out on a daily basis.

  9. Whether they realize it or not; our government officials are at the nexus of a criminal enterprise which is excessive capitalism. The fact that no significant finance industry officials in either the US or the UK have been indicted tells us the government officials are part of the same criminal enterprise. Most of the finance industry top and mid level management knew they were committing fraud from their buying and selling of cdos,cmos and any other kind of paper they knew to be worthless. The government officials responsible for regulating their activity also knew what they were doing was fraudulent. All of this blathering about Geithner, Volker, stimulus is not focusing on what needs to be done which is to apply RICO to the finance sector and the government officials by going after the mid level officials and watch them ‘sing’ when faced with the prospect of indictment and prison. Until you clean up the excesses of capitalism through criminal prosecutions; everything else is ineffective.

  10. “Geithner insists, according to John Cassidy, that the Obama administration has “proposed the biggest regulatory overhaul in seventy-five years.”

    my candidate for the biggest regulatory overhau in the past seventy-five years was congressional action to undo the the Gramm–Leach–Bliley Act which put was an UNDO of the glass-steagle act

  11. Rian,
    Please go read Stiglitz’s latest (Free Fall) to understand the extent to which the bailouts were NEVER about the little guy, but really totally about the capital markets. It will take some time, and unfortunately another crisis, for people to realize how damaging to the the economy the way the bailouts were conducted is going to be.

  12. There is nothing that differentiates the too big too fail bailouts from what occurred in the former soviet union in the 1990’s. In both circumstances a very small group of politically connected and extremely powerful interests used its influence to strip off the extremely valuable assets of the state for little or nothing, while simultaneously saddling the state with comparatively over valued and worthless assets, debt, guarantees, and securities.

    Political patrons became oligarchs. And, existing millionaire oligarchs became richer and more powerful billionaire oligarchs. The Russian people got nothing, and were not even a remote consideration. Just like the 300+ million Americans a little over a decade later.

    Welcome to Russia! If you are not in the top 1/2 of the top 1%, you are part of the proletariate. You only matter insofar as you can serve the oligarchs. You might work for them (maids, butlers, drivers, security, nannys, tutors, riding instructors, etc), or through your existence and the ways the rules are set up you might provide a basis for them to extract fees and income for them, or you might be of benefit to them in your role in the military to fight wars to protect their interests. Otherwise, stay out of their way, don’t burden them with your lowly presence, and certainly don’t question their intentions or supremacy.

    Good luck!

  13. Maybe you have trouble understanding that in saying “public” he means “public opinion” and in saying economy he means the system in which we trade goods, services, labor and credit. I thought that the distinction was pretty obvious, but I guess I’m just extremely smart.

  14. really? You care to give some examples of his “pseudo sophisticated deceitful hoagwash” or are you just full of pseudo sophisticated deceitful hogwash? You awesome spelling skills suggests the latter.

  15. Had the Obama administration not initiated the massive stimulus package, the worldwide economy would have collapsed. Whining about taking action, based on the “banks” getting the lion’s share, is disingenuous and flat out wrong. Without the banks…there is no economy.

  16. The “patient” isn’t dead…only their brains.

    I suggest you red more and blather less.

  17. Geithner and the banksters are running scared. They read the election returns from Iceland where banksters and reckless investors bailout was rejected by 98.5% of voters.

    The next act will be a massive propaganda campaign that will make Bernays and Goebbels blush. Expect the politicians to line up behind the propaganda campaign – recall that Iceland’s parliament supported the bailout 33-30.

  18. I don’t think that’s the overall opinion expressed by this blog. I’m just a dumb engineer, and I can’t possibly speak for Simon or James, but I think the points they make are that what was missing from the bailout was for more strings attached to the bailout money, restrictions of using it for bonuses, and some meaningful reform, including breaking up the big banks. The problem wasn’t just the simple fact that there was a bailout at all.

  19. Citing one guy spouting hyperbole is hardly a counter to criticism of another guy’s hyperbole.

    I’m halfway through Freefall now. While he has some constructive things to say, he spins a lot of the worst reading of facts without any support.

  20. Your wife’s pension was whacked before Obama came into office. Can I assume you don’t remember the 800 billion dollar bailout bill signed by Mr. Bush?

    Now, why do you suppose he did such a thing?

  21. One could argue the opening rounds of that propaganda campaign were fired on the pages of the New Yorker and the Atlantic.

  22. Can I assume most here haven’t taken the time to do the math relating to the DOW?

    It was at about 6,000 when President Obama took office…and stands at about 10,000 today.

    Instead of whining and bitching about Tim…think about investing.

  23. yeah, really, but go read the article again if you need the finer points. As for my so terrible spelling skills, I’m afraid you’ll have to do with it, douchebag (did I spell that ok?)

  24. When you say something “insults our intelligence” you then have to back it up with some facts, rather than just hope I am relying on your intelligence.

    Either you are on oracle, or you insult our intelligence.

  25. Because they are in bed with the Financial Industry, all they offer is BS and slight of hand.

    My favorite is Obama’s very earnest promise to get back every dime of taxpayer money given to the banks.

    Of course anyone with a passing interest knows that the economic and personal damage is FAR worse than the TARP money, and the support for the industry has been FAR more than TARP too (e.g. Fed’s ZIRP, QE, and more).

    The Repubs would likely be as bad or worse, so there is no where to turn except to: Fix Congress First

    PS I posted this again because the moderation system didn’t like that use the full spelling for BS.

  26. Tim ‘extend and pretend’ Geithner declared publicily
    that he never was a regulator, and is again lying through his teeth, lobbying with the bank lobbyists
    for the big banks to be under the supervision of the
    FED, a (in)famous regulator…Some call it rightly ‘Treserve’, wash, rinse and repeat, the greatest scam ever witnessed in the history of the US

  27. When I hear the bankers join Congress in screaming for Geithner’s head, then I’ll know he’s doing a good job for me.

  28. Exactly its the other way round. You have to destroy the village to save it!!

  29. The US economy is a credit economy. Thus, when the Federal Reserve (Bernanke and Geithner at the NY Fed) restricted the growth of M1 from 2003 to the fourth quarter of 2008, they contributed to the economic crisis.
    The “new consensus” view on monetary policy articulated by Bernanke and colleagues at the Federal Reserve (Fed) is the control of interest rates by central banks would keep inflation low. They argued that by keeping inflation in check, central banks are able to keep capitalist economies in a non-accelerating rate of unemployment (NARU) state.
    Thus, for them the way to keep inflation in check is by restricting the money supply or credit. However, in a monetary or credit economy, the availability of money is necessary for spending decisions, which creates jobs.
    When the Fed tightens credit through Federal Open Market Committee (FOMC), which was led by Geithner, it makes it difficult for entrepreneurs and consumers to obtain loans that they would use to purchase inputs to the production process, such as hiring workers. The wages of hired workers are used to purchase goods and services from merchants (businesses). Merchants use their earnings to buy commodities from entrepreneurs. And, entrepreneurs use their earnings to repay the banks. When the Fed truncates this process, it creates economic instability (recession).
    It is appalling that a Democratic administration has two Republicans steering the economy. If Democrats wanted Republicans at the helm of the economy, they would have voted for McCain. This is the “Great Disappointment” with Obama and the Democrat party.
    We need to create a third viable political party that is not tie to rentier capitalism.

  30. Wasn’t it Westmoreland who said in Vietnam, “We must destroy the village to save it?”

    The salvation given by Summers, Geithner, and Rubin are like a neutron bomb: the save the wealth while killing regular people.

    If we had a real justice system, those three and former treasury secretary Hank Paulson would be on death row or already moldering in their graves after being executed for economic terrorism and treason.

  31. “RICO or Riots” makes a good bumper sticker but a few show trials wouldn’t fix the problem and most would probably get off by blaming regulatory permissiveness and diffusion of responsibility

    Channel your anger to solution that is more realistic and worthwhile:

  32. >>“we saved the economy but kind of
    >>lost the public doing it”

    Translation: “Waah, waah, waah, why am I not getting any credit for having saved so many bankers’ bonuses?? Shouldn’t that count for something??”

    Sure, Timmy, sure. Go hang a Mission Accomplished banner at 85 Broad Street.

  33. First, it does not take a lot of brains to throw trillions of dollars at a problem, create a semblance of stability, and then claim victory.

    Victory, if it is achieved (which I highly doubt), will only be know over the next five to ten years.

    All that has been done is to kick the can (ie the problem) done the road and hope and pray that growth/inflation will solve the massive problems.

    So it is highly premature for Timmy to be taking any victory laps.

    Finally, I am amazed at how many people look at these issues as Rep. vs. Dem. STUPID! The problems of the financial system have been created through REP and DEM admins alike. BOTH PARTIES HAVE FAILED THE AMERICAN PUBLIC.

  34. Excellent, Simon Johnson. Well said.

    I have ALWAYS been liberal-minded, a Democrat. But no more. Never again. Tea Party time. If enough of us ex-Democrats join up, that movement might become very interesting.

  35. The opening round of propoganda was published on the weekend after September 18, 2008 when Nancy Pelosi appeared with the other members of congress and Paulson and appeared as if she had seen a ghost….

  36. “The main feature of the plan, of course, was – following the stress tests – to communicate effectively that there was a government guarantee behind every major bank or quasi-bank in the United States.”

    Wow, that’s not even close to true. The government simply guaranteed that if any of the 19 largest BHCs couldn’t raise the required capital (as determined by the stress tests) in the private markets, the government would be willing to inject the capital (for a price, of course). In no way did the Obama administration guarantee every major bank or quasi-bank in the US — claiming that they did is just a lie, pure and simple.

  37. one guy… joseph has a nobel and if that isn’t good enough a fairly stout history in the economics world. Maybe Rian does too but then again most likely not.

  38. Meanwhile, back at the ranch……

    Wells Fargo had a RECORD YEAR in 2009!!!

    “Wells Fargo completed a tumultuous 2009 – which included its addition of Wachovia in the largest U.S. bank merger – with an unexpected, $2.8 billion fourth-quarter profit. The company posted record net income of $12.3 BILLION LAST YEAR.”

    Mark Oman, head of Wells Fargo’s Home and Consumer Finance Group, saw his total compensation increase by about $7 million last year, according to documents filed this week with the Securities and Exchange Commission. Oman’s total compensation for 2009 rose to just under $11 million as the company doubled its size and reported record earnings of $12.3 billion for the year, according to the SEC documents. This compares with the $3.9 million in total compensation reported for Oman in 2008.

    Wells Fargo paid its top executive John Stumpf total compensation of about $18 million.

    I guess the special Paulson tax exemption, the free money, the guarantees, the TARP, the 90% SBA guarantee, the $250K FDIC limit……helped a few people….

  39. There is a total disconnect between Wall Street and Main Street. Here we have 10% unemployment, 20% underemployment, record foreclosures, but yet prices for goods and services are going up!!! We could use some deflation and the fat cats need a vast humbling in pay cuts with salary caps.

  40. No, the complaint is about the banks being bailed out without any strings attached.

  41. I get it — you want me to find the finer points because you can’t. Sounds like you need to spout but since you’ve got no specific complaint, you’ll just say something meaningless and hope nobody calls you out.

  42. Amount of new regulation, zero. The next bubble and crash is already on it’s way, just watch.

  43. Amen!

    Maybe it’s time to break up the USA into the CFA: the Confederated States of America. We could have Ecotopia on the left coast, Frugalia in New England, The Western States Alliance for the rugged plains of Montana, the Dakotas, the Midwest States Alliance for the flyover states, and Jesusland for the wingnuts, and New Mexico for the states where its impossible to stop the flow of illegal immigrants.

  44. I see. Once one gets a “nobel” that means he is thereafter unbiased. Intriguing.

  45. Much of the above assumes an exogenous theory of money. You’ve heard people discussing the extent to which current mainstream economic theory is incorrect?

    Here’s a good corrective to exogenous money:

    “The Roving Cavaliers of Credit” is from Karl Marx. However the article’s author, Steve Keen, is not a Marxst.

    If you wish to do further research, look up Hyman Minsky.

    There is alternative theory out there that makes a great deal of sense.

  46. Susan – I’m afraid I don’t see the difference between what Simon said and what you said. In other words, I don’t think Simon meant to use “gaurantee” in a technical sense but rather that his view of the strategy was to clearly communicate that the government wouldn’t let the largest banks fail. Isn’t that what you are saying too?

  47. Susan, you obviously don’t work in marketing. One can very effectively communicate a lot of things without ever actually committing ones self to them.

  48. If you mention something like Financial Crisis Inquiry Commission, it’s always nice to give some links.

    So who’s the guy on the front page of Oh yes, that’s right. Phil Angelides, former Treasurer of the State of California. I live in CA but don’t consider “Treasurer of the State of California” a contradiction in terms.

    A CA state proposition is now underway that would change state spending approval from a 2/3 to a majority vote. There’s a lot to CA’s story but the proposition may be one of the keys to unlocking state finances. An upturn in the economy would also help but I’m not counting on that in the near-term (and the medium-term is questionable as well).

  49. Get off the GDP. You don’t really care about the deficit. There has always been a deficit. We have an African American president, so I’m sure ALL the problems of the country are his fault. Get real. Trust me, future generations will take care of themselves the way future generations always have. If Obama had NOT helped the banks, I wonder what OTHER names you’d be calling him now? This president is damned if he does – and damned if he doesn’t. You people that try to blame the country’s problems on Obama, are just using him as a scape goat. He’s an African American – he’s expendible. This country was built on the institution of SLAVERY. It’s not gone – no matter how much you protest. Get off of Obama, and get on the culprits that REALLY run this country – and it ain’t Obama.

  50. The straw for this latest crisis in my opinion was the rapid run up in gas prices in 2007. All those paycheck to paycheck Americans in the big mortgages suddenly started falling behind when the gas and oil bills doubled in just a month or so.

    Don’t look now, but oil’s creaping back up to $100 a barrel again – good luck with retail spending picking up when gas is $4 a gallon again.

  51. Bruce, right on all counts. Enron and Worldcom and others are not in the too distant past to have learned the criminality of management (execs) and the deceit of shareholders and public taxpayers. Remember that nations crumble from within as the objective conditions are seen and experienced by all.

  52. Susan, everyone but you, perhaps, now knows that that the government has effectively guaranteed every TBTF bank. What is most disturbing about Cassidy’s piece to me is that he puts forth idiocies like the “banks have paid back the government” and that taxpayers might even “make money” off the rescue without mentioning the single most horrific and disturbing cost of the bailout, the TBTF guarantee. He is not a serious man.

  53. Tim wrote March 8, 2010 at 12:29 pm:

    “…the public will clearly not understand until their ATM actually doesn’t work that fateful day we came close to having occur in Fall 08.”

    I agree. Nice catch.

    “Here is an idea to fix what Americans understand:

    We write the financial reform we know we need ala as inspiration.”

    Long story short:

    “The American financial system walked the American economy off a cliff. Large players took catastrophic risk. They were allowed to take this risk because of a series of fundamental regulatory mistakes; they were encouraged to take it by the implicit, sometimes explicit promise, that failure would be bailed out. The gamble was obvious and it worked. The suckers were us. They got the upside. We got the bill.”

    “There is a very radical measure which would, I believe, work a substantial improvement in our system of conducting a campaign, although I am well aware that it will take some time for people so to familiarize themselves with such a proposal as to be willing to consider its adoption. The need for collecting large campaign funds would vanish if Congress provided an appropriation for the proper and legitimate expenses of each of the great national parties, an appropriation ample enough to meet the necessity for thorough organization and machinery, which requires a large expenditure of money. Then the stipulation should be made that no party receiving campaign funds from the Treasury should accept more than a fixed amount from any individual subscriber or donor; and the necessary publicity for receipts and expenditures could without difficulty be provided.”

    — Theodore Roosevelt, 1907, State of the Union Address

  54. Funny you should mention OIL and GASOLINE and 2007…..hmmmm…..what firm was that again that speculated OIL and GASOLINE and DIESEL prices through the roof…..?

    Goldman Sachs. Strange and ultra coincidental tha they owned all those swaps on CDOs….which they had underwritten…..


  55. Bankers Panic 1907

    “The Panic of 1907, also known as the 1907 Bankers’ Panic, was a financial crisis that occurred in the United States when the New York Stock Exchange fell close to 50% from its peak the previous year. Panic occurred, as this was during a time of economic recession, and there were numerous runs on banks and trust companies. The 1907 panic eventually spread throughout the nation when many state and local banks and businesses entered into bankruptcy. Primary causes of the run include a retraction of market liquidity by a number of New York City banks and a loss of confidence among depositors, exacerbated by unregulated side bets at bucket shops (Derivatives).

  56. At this point, with the powerful financial interests charging full forward once again, it seems to me inevitable that, sooner or later, in one form or another, we will face yet another catastrophic financial crisis, and at that point the government will already be ‘all in’. The collapse will, in effect, take the government down with it.

    I don’t see that collapse as desirable, but it will undeniably present radical opportunities (to both the left and the right) to radically redefine and reshape both finance and the polity.

    It ought prove interesting.

  57. Without the banks…there is no economy.

    That’s a flat out lie.

    We don’t need the big banks for anything meaningful or constructive, and we’d be much better off without them. They create nothing but costs and complexity; they do nothing but impose taxes and commit crimes. They’ve stolen $14 trillion just since the Bailout began, and that’s in addition to all they stole in the decades prior. They should be smashed to splinters and the criminals brought to justice.

    Every last one of them. Including their flacks.

  58. Rian wrote March 8, 2010 at 12:49 pm:

    ” But, stop attacking the bail out as though it were solely a ploy for Geithner to help his rich friends out.”

    Lost decade’ possible for global economy, ECB’s Stark says

    March 8, 2010, 1:28 p.m. EST – Market Watch – excerpt

    WASHINGTON (MarketWatch) — “The economic recovery could be doomed to being slow, fragile and prone to reversal if there isn’t a strong commitment to restructuring the global economy, according to Jurgen Stark, a member of the board of the European Central Bank.

    “The failure to address long-overdue reform challenges promptly might result in a ‘lost decade’ for the global economy,” Stark warned Monday in a speech at the National Association for Business Economics meeting.”

  59. The financial system has failed, i.e. –

    The executives running most of the big companies making up the financial system that allowed their companies to fail have failed.

    Ben Bernanke has failed as chairman of the Fed.

    T. Geithner failed as president of the NY Fed.

    The credit rating agencies failed.

    Investors (pension funds, 401K funds, rich private investors) who bought CDO’s & other securitized credit “innovations” failed.

    Congress failed by deregulating our financial system.

    Also congress who has given up the long term viability of our economy & therefore the long term viability of our country in return for campaign contributions has failed.

    Fannie Mae & Freddie Mac have failed.

    Mr. Obama who has appointed the above mentioned failures (Mr.’s Bernanke & Geithner) & many others to repair the financial system has failed.

    What else do we need to know?

    The stupidity of this group of individuals is both atrocious & mind boggling.

    And who has paid for the failures of these individuals? The 20% of the American work force who are un- or under- employed & the families who gave their money to the failed financial companies to invest and/or save.

  60. Bruce, living in London wrote:

    “Until you clean up the excesses of capitalism through criminal prosecutions; everything else is ineffective.”

    The problem is not to throw the baby out with the bath water.

  61. “It would be easy to take relatively cheap shots at the portrayal of Tim Geithner — “we saved the economy but kind of lost the public doing it” — in the New Yorker, out today.”

    It’s not a cheap shot when the object of the debate is made of cheap.

  62. Jack wrote:

    “Can I assume most here haven’t taken the time to do the math relating to the DOW? It was at about 6,000 when President Obama took office…and stands at about 10,000 today.”

    Dead Cat Bounce

    “The term “dead cat bounce” is derived from the idea that “even a dead cat will bounce if it falls from a great height”.[2] The phrase has been used on Wall Street for many years. The earliest use of the phrase dates from 1985 when the Singaporean and Malaysian stock markets bounced back after a hard fall during the recession of that year.”

  63. Sorry, Milex. Not everything in this world or our nation is designed to persecute the African Americans. Why, if our President does something wrong, can’t I call him on it without race being involved?

  64. Hyman Minsky

    “Disagreeing with many mainstream economists of the day, he (Minksky) argued that these swings, and the booms and busts that can accompany them, are inevitable in a so-called free market economy – unless government steps in to control them, through regulation, central bank action and other tools. Such mechanisms did in fact come into existence in response to crises such as the Panic of 1907 and the Great Depression. Minsky opposed the deregulation that characterized the 1980s.”

  65. The stimulus package is not the same thing as the bailouts for “too big to fail” banks and insurance companies. Obama could have nationalized some banks to get credit flowing and, also, pushed a stimulus package.
    But he didn’t want to offend any “savvy businessmen”.

  66. chas wrote:

    “What else do we need to know?”

    Pay down debt, asset preservation, black swan it.

  67. Can you provide an example of a valid criticism of Obama that is not, as you allege in this case, a by-product of racism? It doesn’t have to be a criticism that anyone has actually made in the real world, just any hypothetical critique that you would accept as valid and not motivated by racism.

  68. great idea–bite-sized pieces of America make for much more digestible bank-chow than does the federal government (although neither seems to be a problem).

  69. “My basic view is that we did a pretty successful job of putting out a severe financial crisis and avoiding a Great Depression or Great Deflation type of thing,” he said. “We saved the economy, but we kind of lost the public doing it.”

  70. I believe that most criticism of him is not racially motivated. The fact that he lacked experience, very few of his appointees have any real private sector experience, that he has not followed through on many of his campaign promises such as Gitmo, Iraq, all Bills posted on the Internet before voting, etc. You see, I look at performance and results as an individual and I don’t care what color they are. Maybe that is my management background, I don’t know but my criticism of him has nothing to do with the color of his skin.

  71. Luckily for our betters there’s no chance of such a referendum in the US.

  72. “My favorite is Obama’s very earnest promise to get back every dime of taxpayer money given to the banks.”

    We did get back the money that went into the banks. Unfortunately we got back our own money that went through AIG and into the back door of the banks.

  73. agreed–it is a bipartisan “neoliberal” consensus that the only people that matter have 7+ figure bank accounts

  74. We need banks to serve a purpose. The big banks we have don’t serve any economic purpose (except for looting this great country’s wealth). We would be better off without those banking behemoths.

  75. Curious that Jack, of all people, would make it his business to talk about brains…

  76. Wall Street doesn’t care…What legal basis could you use to cap their salaries? Every time anyone suggests taxing these pathological greed merchants, 50 Republicans jump up and start yelling that you are trying to punish success…Personally, I feel that the banks and Wall Street, through their thoughtless and reckless acts of greed, owe the American people reparations for the damage they caused. Give them a bail out that makes them enough $$$’s to hand themselves $160 BILLION in bonus money is obscene…it should have been confiscated on behalf of the American people to pay for the damages they caused!

  77. March 8, 2010 – Brian P. Sack, VP – Federal Reserve Bank of New York

    “I will also discuss the preparedness of financial markets for the Fed’s exit, in order to assess how financial conditions may evolve as the exit approaches and gets under way.

    When the time comes to tighten monetary policy, the Federal Reserve will be embarking on a tightening cycle like no other in its history… All of that may sound risky. However, I believe the Federal Reserve is positioned to minimize any risks involved.”

  78. I’m sorry. I didn’t read the post, I just read the headline on the huffington post, and I didn’t read the responses.

    we have been watching the Obama propaganda machine on over drive lately. I keep going back to 1984 where the government writes reality and it gets published just because someone said it. 2plus 2 is five, white is black, etc. It’s the Karly rowe tactic, repete the falsehood so often that people will believe.

    Bernanke hires his own PR firm, Blankfien and Goldman, Tyhe amreican people know the real villians in this story. Geitner is one of the big ones. But the banks aren’t going to allow anyone not their boy in their.

    Maybe one day if we are lucky justice wll be served on bernanke, paulson, geitner, summers. there are the people who directly caused the crisis. I feel they should be put on trial for high treason. But the crooks run the government know.

    If geitner has actually been doing his job we wouldn’t have had the crisis, the same goes for bernanke. These people know that if they walked down the street without security they would be ripped apart by the mob.

    The banks got Bernake reappointed. Geitner sumers, etc will never be pushed out. Because democracy isn’t something that exists in america anymore. It what the bankers want that goes. period. Lets fat it simon It’s “the quiet coup”, the “doom loop” and “this time is different” all over again. we know the mistakes, we know the players, it’s been going on for 500 years and has been well described by rogoff and carmine. But that’s what the bankers want and we don’t have a choice unless we decide to take it the same way our founding fathers did.

    These people directed the largest theft in history and directed it to their bank friends right under our noses. It was like Tom sawyer getting all those fools to paint the fence and they paid him. well we are the suckers, and until we decide to not be any longer they will keep stealing from us until we stop it.

  79. Black Swan it? I’ve yet to encounter ‘black swan’ as a verb.

    Nassim Taleb is obviously a brilliant guy. He does though seem to be big into self-promotion as well.

    I’m not sure Harold Edwin Hurst was ever into self-promotion and besides he lived quite some time ago.

    Taleb might mention Hurst in one of this books but I wouldn’t know because I haven’t read any of Taleb’s books. Mandelbrot does spend time on Hurst in _The Misbehavior of Finance_. A book that didn’t quite live up to my expectations but was good and worth reading all the same.

    Hurst was the head of the British Survey or something in Egypt in the 19th century. In the process of figuring out just how large damns for the Nile should be, Hurst did ground-breaking work on how patterns in nature trend.

    Very different stuff from key assumptions in current economics and finance that have contributed (the assumptions) so much to things exploding in our faces.
    Which brings us back, if one wants, to black swans (a noun I think).

  80. “We don’t need the big banks for anything meaningful or constructive”

    You couldn’t be more wrong.

  81. DCB wrote March 8, 2010 at 5:53 pm”

    “These people directed the largest theft in history and directed it to their bank friends right under our noses. It was like Tom sawyer getting all those fools to paint the fence and they paid him. well we are the suckers, and until we decide to not be any longer they will keep stealing from us until we stop it.”

    Mark Twain wrote:

    “Under certain circumstances, profanity provides a relief denied even to prayer.”

    (1835 – 1910)

  82. You know what all this propaganda shows me. Obama is more concerned with keeping his masters (the bankers) happy than he is with winning in novermber or being a two term president.

    I think he will be remembered very poorly by history. when there was a time america was ready, willing and able tochange. when you could have had the voice of the people and set america towards a path to the future. he didn’t. He will go down as one of the historic failure presidents because he refused to lead and decided to surround himself with corruption.

  83. “I just read the headline on the huffington post …”

    I was wondering who let all these people in.

  84. Dear jack,
    I see you have bought the propaganda hook line and sinker. My guess is that you believe the bush administration also didn’t lie us into the Iraq war either. Sadddam, al queda, wmd. uranium.

    I have a bridge you may want to buy.
    attempting to restore bank capital via frre market mechanisms (whi we are doing) ensures that 40% of those profits get put in baners pockets, alterning mark to market ensures insolvent banks can pay bonus money instead of restoring capital levels, enuring banks can make profits in our free markets ensures the federal reserve keeps rats at zero for ever destroying the value of the currency, destroying the savings of millions of hard working americans excpe the top 3% who own all the stock. You want to go on and on and on.

    nationalize, restore capital levels, own, don’t give bonus money until capital levels restored, sell back to public. the 700 billion givem to banks could have been used by a US national bank with 10/1 leverage to create a 7 trillion dollr stimulus to the economy. But that wouldn’t have involved funds going to the banking industry.

    Anyone who believes this man I feel sorry for you.These are just lies used to justify people stealing your money. Notice all these programs that are required to help the economy make them richer and you poorer. Just look at the results and ignore what those who are gaining something have to say.

  85. menonmnon wrote:

    “Which brings us back, if one wants, to black swans (a noun I think).”

    In other words, prepare for an occurrence of high-impact, hard-to-predict, rare events that are beyond the realm of normal expectations. In this game of Jeopardy its best to treat Black Swan as a verb.

  86. @jamzo,
    thos could be very true. I propose something, but don’t support it, don’t put my weight behind it, etc. the statement is meaningless. The man has made no real push towards any financial reform measure and only talks about it when his poll numbers tank. when we get close to actually having financial reform he starts pushing heal care once more to distract fromt he fact that the real reform isn’t happening. it’s the classic bait and swithch and he’s been doing it a ong time. diostract the public from financial reform, get the media taking about something else, get it off the news. clear as day is the strategy.

    Today I learned the fed still gets to regulatetheh biggest banks. we we know how that worked out before. a disaster. the bankers determine who are the memebrs of the fed. they therefore choose their own regulators. where was Obama during all this. why talking about health care. (LOL)

  87. I’m in complete agreement with Prof Johnson here. It ought to be up to the TBTF banks to work out their toxic assets, preferrably with their own profit making capability, and government ought to safeguard only the bank capital side to ensure credit. Therefore PIPP is neither useful to the US economy nor helpful to the taxpayers, and it prominently highlighted just how ‘instrumental’ Geithner really is in ‘saving’ the economy or anything.

    The other thundering point in this article is that the world, including China, have been holding their collective breathe waiting for an even more dominating US banking and financial system to put them in even greater competitive disadvantage, but I guess they have been sighing a collective breathe of relief. The outcome of US banking and financial reform at this rate may at best return the system to near status quo, but at least it seemed to have been spared outright decimation. Perhaps we ought to thank the Republicans in this regard, but the crisis was essentially wasted, and it’s not for lack of talents in Obama’s administration.

  88. That the oligarchy wants Geithner to be maintained can only mean one thing:

    There is still some looting to be done. Beware!

  89. The argument that we do not need the banks is simply wrong. Banks allow money to move from person A to person B. You can do without a few banks, but what was happening was that nobody trusted any bank, so nobody would do business… with anyone. Few people realize how close we really were to a massive failure of confidence in our financial system. If that had happened, money would have simply stopped flowing. No paychecks. No payments. Massive concurrent bankruptcies outside the financial sector. I think Geitner and Paulson did just fine in a very tough situation. Does it tick me off that the bailout went to the banks? Yes… but I also believe it was entirely necessary.

  90. These threads are almost enough to make me leave this blog. Death penalty? Do you have any sense of what is (and should be) criminal conduct?

    I don’t understand why people can’t discuss these subjects without demonizing (and criminalizing) disagreement. Whatever you think about the choices that were made, Summer, Geithner, Paulson and Rubin are not out to get the American public.

  91. hi im new here. a few weeks ago you had a chart showing the laws that were made since the 1930s to prevent another depression. then next to that chart you had another chart showing the years those laws were taken apart. ive been trying to find it with no luck. if anyone knows where it is could they reply . thank you very much 1949bill

  92. Whereas Stiglitz ignores that the banks have repaid/are repaying, and that TARP is turning out to cost much less than originally thought. Error all around.

    But I agree with you. THE key point is the TBTF subsidy, which people of all political stripes should be able to agree is a bad thing, and has been a criticism of the housing GSEs from the right for at least a decade. To me, that is the stronest, and most likely to be successful, argument for breaking of the big banks.

  93. 1. Pay attention, prices are going up at historically really low rates.

    2. A little deflation is NEVER a good thing.

  94. Oh, the bailout was necessary, and we do need the banks. But we do not need these banks, as they are. Nor do we need these bankers.

    Conditions for the bailout should have included the immediate resignation of the CEO, CFO, and CIO, at least. New elections for the board. Maybe firing within a year of the top 1% of management. Heads should have rolled.

  95. “I think [Obama] will be remembered very poorly by history”

    Hoover lite.

    Just the other day I remembered that he had proclaimed, “Yes, we can!” I had forgotten that, and I guess he has, too.

    I still think that it is true, though. The Can-Do spirit is distinctly American. Currently it is being poisoned by the Nay-sayers and Fear mongers, but it is not dead.

  96. Wells Fargo, of course, is the biggest bank that seemed to avoid the worst of the bubble excesses, and it most likely got Wachovia on the cheap, so maybe management brought in a windfall for its shareholders.

    But I still haven’t seen anyone (hey James, this is a cue for you) try to assess how the prices of mortgage-related assets from Sept. 2008 compare to prices today. Instinctively, my assumption is that some of the profits that big banks are booking now (especially those that bought other banks on the cheap) are bounce back in assets whose market prices were deeply depressed a year and a half ago. Unfortunately, I don’t have the time or expertise to test that, and those who comment on the crisis seem more interested in their own agenda.

  97. Banks are the heart of the financial system, without which a modern economy cannot function. The biggest banks should be broken up so that they’re not TBTF. The financial sector should be reregulated. As a start the Financial Services Modernization Act of 1999 should be repealed and the Glass-Steagall Act should be reinstated. It also wouldn’t hurt if those that caused the crisis were banned from the financial industry, but that doesn’t very likely, especially now that they “run the place”.

  98. “those three and former treasury secretary Hank Paulson would be on death row or already moldering in their graves after being executed for economic terrorism and treason.”

    In China maybe they would.

  99. As it’s played out, the bailout has NOT been of the banks but of the bankerRs – that’s a big difference. The banks, and AIG, have been used as mere conduits to funnel taxpayer money to the bankers.

  100. Good Comment, I sympathize with your point, but in the midst of a crisis you have to be pretty careful not to make it worse. I agree that a bank tbtf is a bank we don’t need; there needs to be a way to prevent this. The conditions you mention are attractive… but my guess is that Treasury is focussed on avoiding runs on any more banks at this point, and the solutions you suggest could be an invitation to do so. There is a mini-crisis per week around the world, any knowledgeable person is still on full alert. That said, I agree that much more needs to be done; but I really don’t know enough to propose a workable solution. What I know is that what these banks did was insane, but how do you stop their current return to business as usual without doing some serious damage to the economy? That question should be keeping the administration up at nights, an answer is imperative.

  101. Yes, I think the ultimate accomplices here have been our elected officials, who would rather accept bribes (aka “donations”) than do the jobs they were elected to do. Who do you really blame, the criminal or the cop who took a bribe to let the criminal get away with crime? Or what about the lawmaker who makes the crime legal?

  102. Taibbi’s only got half of the issue with #3. Modifying mark-to-market has the potential to hide further bad assets. But enforcing mark-to-market also has the effect of causing wild swings when applied to fixed income securities that are not actually impaired, and banks may well be “making” big profits now based on having market too low a year ago.

    Taibbi is great at invective, though. Too bad he looses touch more and more as he goes along. I would take everything after #3 with a giant grain of salt (e.g., as to PPPIP, why are the holders of crap assets selling to the banks at less than they could get from selling to the government? If the answer is that they can’t sell directly to the government, then getting more crap out of the system is a good thing, even if the banks get to make something on the spread; number 6, which describes a crime, confuses CYA disclosure with actual conduct, that would actually be prosecuted if detected; number 7 misdescribes a Ponzi scheme, which a bubble is not, and engages in the pretext that the Fed has a choice put to keep money really cheap, and ignoring that if there is money to be made lending to small and medium business, why would banks say no other than if they think it is too risky?)

  103. Uh, no. By “the economy” he means “his economy” — the productive enterprises that Geithner and his class are systematically looting. I thought that the distinction was pretty obvious, but I guess I’m just extremely smart.

  104. Really? The bailouts in toto were the largest transfer of wealth in recorded history, and they came and will come out of the hides of the taxpayers. I suggest that “getting the American public” is exactly what Summer, Geithner, Paulson, and Rubin (and both legacy parties) are up to.

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  106. I think Obama could have tackled Washington corruption and lobbyist corporate power by enlisting all those people who helped him get elected. He could have told us he still needed our help to keep insurance companies from gutting health care reform, and to get control of finance. He could have used his supporters to flood certain congressmen with emails and calls, to exert pressure at key points. He had developed the most effective, largest election organization the world has ever seen, with email lists to contact huge networks of supporters. The energy was electrifying at the inauguration, and millions of people were ready for action. He never called on them. He just huddled up with insiders. I can interpret that three ways, and none of them are good.

  107. Since there has been no reply to my answering of MikeBC’s question, I must asume the criticisms I listed must not be racially motivated in his mind. Mike, I thank you for your concurrence. Remember just because he makes errors in policy making and he is African American does mean that those that point out those errors are racist. They/I are just concerned citizens of this country who disagree with what is going on.

  108. See S&L regulator William Black on Bill Moyers, talking about “accounting control fraud”. Plenty of banksters ought to be prosecuted as criminals, and in the S&L era, under Reagan — under Reagan — they were. Of course, nowadays, we live in a pure kleptocracy, so the rule of law is only for peasants.

  109. Oh, it’s too late to do anything overt now. What we could do, but probably won’t, is to let the bankers know privately that if there is another bailout, the axe descends.

    Covert rendition might still be possible. I understand there are plenty of unused dungeons in Europe. ;)

  110. So what’s the solution to this banking problem? Simple, but not easy. Neither was settling this country or storming Normandy Beach. It’s just something else we need to do.

    Start by getting rid of the Fed. Abolish it. Period. Gone. Done.

    Open 50 State Banks.

    North Dakota, the only state with a state bank (opened in 1919) does not have a failed bank on the FDIC list that started in Oct. 2000. It also has a budget surplus of around $1 billion.

    ND also has the lowest unemployment in the country, no housing problem & no large bank exposure or branches. Just local banks & the state bank.

    This compares with our central bank’s (Fed) balance sheet which is over $2 trillion of which over $1.5 trillion is loans of which over $500 billion is national debt. Another $367 billion is MBS. This is our money they’re giving to the big insolvent banks & Freddie & Fannie to buy up their bad loans. The Fed just ain’t cutting it.

    Until you get rid of the Fed & replace it with a body of independent senate approved economists & business people (no banksters), you’re pissing in the wind.

  111. Simon, with 141 responses predating this one, I doubt if you will pay much attention. I think you have been living with the notion for too long that things inside the Beltway (remember, the home of the “bandits”) are rational in relation to 99% of the reality of our country’s situation vis-a-vis economics, or, for that matter, anything else. Oh, they, yes, are actually quite rational, if you are a part of the .001% of the populace that owns the country. We tax payers certainly don’t, and haven’t for a long time. It’s only gotten worse in the last few years, as gradually (ever since the 1990’s and the passage of Gramm-Leach-Bliley) until they finally succumbed to the forces of economic reality. We can no longer afford America, period. The vested interests in the military-industrial Keynsian Society finally pushed us over, and decided to go for broke, knowing full well that they only needed an additional decade (of profligate deregulation) to generate enough millions and billions to last them until the time when they perished.

    My brother and I were talking tonight, and he and I agreed that the reason that this has happened is that there is a great human divide. Those with the billions and power have no concept of going jobless, losing a home in foreclosure, watching someone perish because their health insurance is cancelled. They just can’t begin to relate. Any more than if they arrived from a different planet. The same as we can’t understand why they didn’t band together to offer some of their ill gotten billions to help Haiti or to do anything vaguely humanitarian, even if a tax writeoff were given in exchange. We have no clue about their world of incredible insularity. Tim Geithner knows, Larry Summers knows, the folks in the White House and on Capital Hill know, Ben Bernanke knows. These elitists simply believe that they are the chosen ones, and that whatever they must do, moral or immoral, to protect what they have is fully justified, regardless of who dies or who lives, so long as they get their tee times, have their limosines and yachts standing at the ready, and don’t have to watch news at all. Sad, and true. America is fried. We will all be speaking Chinese or Hindi within 15 years.

  112. So I’m reading on the huffington post how treasury is fighting the Fed audit. Which of course means Geithner!! Now this has essentially passed both legislative branches. being held up in the full senate. Now where is Obama on this. Nowhere!!! Isn’t he the boss. Doesn’t he have the ability to tell treasury to support the measure. Just another example that he is a fake and phony.

    I’ll tell you this. I bet you audit the Fed and Geithner goes to jail. the NY fed in the nexus of all this fraud. Ovar and over, each and very day, more and more proof comes out that our country is being looted by the very people who are in power.

  113. What’s with Geithner and Ford? His Wikipedia page has been updated to reflect that not only was his dad involved with the Ford Foundation (don’t miss the bit about how he met Obama’s mom “at least once”), but that his Maternal Grandfather worked for Ford, in PR.

    Doesn’t look good when you consider Henry Ford’s friendly relations with Germany back in the day.

    Also, there are some interesting people on the Board of Trustees at the Ford Foundation. Kathryn S. Fuller, for example, who spent many years with the World Wildlife Federation (WWF). Henry Paulson, IIRC is very involved with the WWF. You bump into the WWF a lot actually, when you run down the cv’s of behind the scenes players. Why is this? They control a lot of donated money? They control land/resources? There *is* something about the organization. What?

  114. Make that “World Wildlife Fund”

    Of course there’s a Goldman Sachs rep on the board at the Ford Foundation. There’s *two* at the WWF — Linden and Litterman.

    The Pres and CEO, Carter Roberts:

    Under his leadership, WWF has forged partnerships with institutions like The Coca-Cola Company, Wal-Mart, Mars and CARE.

    Prior to joining WWF, Roberts worked for 15 years at The Nature Conservancy, first running their Massachusetts chapter and then opening their programs in Central America. Roberts serves on the boards of the Grantham Institute for Climate Change, a collaboration between Imperial College and the London School of Economics; InterAction, a consortium of development and environmental NGOs seeking a holistic approach to foreign assistanc

  115. And then there’s the Nature Conservancy, another very wealthy organization, which in the early days shared offices with the WWF in London, and today is headquartered in, wait for it… Arlington, VA. It is currently run by a former Goldman Sachs managing director. Are we seeing a pattern yet?

    And it gets better. The first president of the WWF was Prince Bernhard of the Netherlands, a member of the Nazi Party, and member of the “Reiter SS.” He worked at IG Farben, and would later form the Bilderberg Group. Among Bernhard’s later accomplishments: accepting a million dollar bribe from Lockheed to encourage the Dutch to purchase american fighters; Project Lock, in which WWF funds were used to provide the appearance of using mercenaries to frustrate the ivory trade, but actually, it’s thought, the mercenaries were involved in the trade themselves, as well as running counter-insurgency operations in support of apartheid, against the ANC.

    Is this still happening today? Are WWF funds being used to monopolize and fund conflict in Africa? Don’t let those little details bother you though. Feel good when you send in your $100 check each year.

    Regarding the Nature Conservancy: Interesting that Stormin’ Norman Shwarzkopf “was a member of the Conservancy’s President’s Conservation Council”

  116. Too big to be saved – it’s a neat way to become the 800 pound gorilla in the china shop.
    Either you do what I (we) tell you, or else…
    The big banks in effect have succeeded in becoming “bigger than life” – even if we were to boycott them entirely, we would only succeed in hurting ourselves.
    But it might be worthwile to endure that pain if we want to regain any sense of normality.

    IMHO, that is.


  117. Chas — I agree 100%. The only way to regain control may be one state at a time. Then tackle Washington. Arnold might help.

    Btw is North Dakota like that because it is populated with Nordic folks ?

  118. Hey AJ, it’s called ‘cover your as..’ Paulson, Rubin, Summers all made millions on the systems they developed(Geithners’ probably in his Swiss account), and they want to keep it. The ‘claw-back’ all Americans want will come from their said as.., and they know it.

  119. Another analogy would be France, circa 1785. Think of the corporate poobahs, politicians, media and academic flaks as the nobility, Geithner or Bernanke as Marie Antoinette, Obama as Louis, puffing up before his teleprompter as opposed to tinkering with his clocks. A critical difference is the potential for perpetual looting through the Federal Reserve. To those with corporate and political connections, money is free. Others borrow at 29%. There will always be plenty of work: guarding, snooping, invading, occupying; for those with advanced degrees, pandering, justifying, manipulating, deceiving. To those who believe this cannot continue, just watch.

  120. Good comment. In order to try to understand, I like to imagine the breakfast table conversation of the controlling elite, or what the ol boys say at weekend get-togethers.

    I am sure they study history, and take a long view. Are they concerned about the coming ecological crisis on Planet Earth, be it by overpopulation, global warming, or pollution and death of the oceans? They are protected by their wealth, but they have to breathe the same air, and so will their children. They know it is likely things are going to become very, very unstable. If you had a billion dollars, and you wanted to insure your family’s survival for the next five generations, while Earth is in ecological and social upheaval, what would you do?

    As for helping Haiti and the poor, some of them may be abstractly compassionate, but conceive of social problems in terms of eugenics, of social Darwinism. Like, if you save a woman now. and afterwards she has six kids, then in twenty years you have six people suffering instead of one.

    It is interesting to watch what Bill Gates is doing, how he is using his money.

  121. Thanks.

    Here ya and agree with – previously known as

    That has what inspired me that “we the people” must be the ones to also write financial reform and ram it thru.

    I’ve communicated with Lessig and KoncZal of Roosevelt Institute about working to do that.

  122. Also Ducks Unlimited. In my small city, if you want to be part of the tight little business community, you need to belong to Ducks Unlimited. Sticker-on-your-windshield type of deal.

  123. Is anyone here saying “let’s not have banks”?
    The issue is: what kind of banks?

  124. 1 – he is in the pocket of the elite, has been since Kissinger.

    2 – he is honest but relied on being a smartguy instead of relying on the people — something Bobby Kennedy would never have done.

    3 – he knows if he tried to make actual change, they would just assassinate him with the secret agents, and blame some patsy — ie he’s just ambitious.

  125. Ducks Unlimited has a fascinating history. Founded by Joseph Knapp, whose dad started Metropolitan Life. Knapp jr. was a duck nut. Before Ducks unlimited he founded More Game Bird In America with people like JP Morgan.

  126. State banks sound like a great idea! :)

    Getting rid of the Fed is another question. We do need a lender of last resort, and states do not have their own currency.

    But having a state bank that can borrow from the Fed at low rates makes a whole lot of sense.

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  128. The Obama Era will be known as the time a Billion became a million and a trillion became a billion.

    No Propaganda is bringing the jobs back.

    All the people that got dumped on when Exxon Mobile was pulling down 45 Billion a year, who were then pick pocketed to put 45 billion into Citibank as they were being laid off

    Everyone inside made billions while everyone outside lost trillions. That’s how you turn trillions into billions and cause generations of agony.

    Yeah, That should go over well in the mid-terms.

  129. I haven’t heard that one before. Oh, wait a minute, I have. That’s what all the bankers said would happen if we didn’t let them rob us of trillions of dollars.

    Have you heard this one: Without criminals, there would be no need for a criminal justice system. If crime became non-existent, would you suggest the government pay people to commit crimes in order to ensure that the criminal justice system and all its satellite industries remain afloat? Maybe you should step inside of history for a moment and imagine what George Washington would have done if a group of bankers tried to extort funds from the US treasury.

  130. With out the Sun King there will be no..
    With out the Fuhrer the people will..
    With out Castro the Revolution will

    There’s always someone saying that with out them, the sun won’t rise, girls pine for boys, crops grown or engineers build.

    History’s graveyard is full of indispensable institutions.

  131. Off the top of my decaying mind..

    Something like 700 banks went tapioca in the Savings and Loan debacle. And there were something like 1,000 successful federal prosecutions for various fraud and bad behavior.

    But sofar, um, Bernie Madoff and a handful, or less of his chums have been Club Fed’ed.

    There is more crime suppression on the back streets of Detroit at midnight then the halls of finance. But, then again, how can the government arrest its self. These ‘private’ banks are corporatist/fascist appendages of the state.

  132. The names change but the game remains the same.

    Ruling rich, state power and dependent idea class( first religion, now academia and the arts ).

  133. hardly…..

    The bad dept would have been swept away and whoever held it would loose (banks, AIG, etc.) and the solvent part of the banks would have been subdivided and bought by those folks who have……


    You see my good frind, it’s a Capitalist system here. Not a dept system or a ponzi system or a smoke and mirrors system.

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  135. I am a lifetime registered Republican here in the “Peoples Republic of Boulder Colorado”.
    I am on the outside looking in.

    Would someone explain to me the economic and socially redeeming value we gain when these global investment banks are involved in esoteric and very high risk areas.
    They have been doing this periodically for at least 150yrs (The House of Morgan).

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