TARP Is Gone – But May Soon Be Back

The Troubled Asset Relief Program, or TARP, is over – more specifically, its legal authority expires on Sunday, so it cannot be used for new “bailout” activities (although legacy programs, with money already disbursed, could last 5 to 10 years.)

The first draft of its history, looking back over the past two years, may be this: TARP was an essential piece of a necessary evil – that is, it saved the American financial system from collapse — but it was implemented in a way that was excessively favorable to the very bankers who had presided over the collapse. And this sets up exactly the wrong incentives as we head into the next credit cycle.

People who are opposed to bailouts of any kind like to argue that TARP was not really necessary. Banks could have been allowed to fail and the economic fallout around the world would not have been so dramatic.

This was, of course, the view taken by policymakers in 1929-31, after the Great Crash. Top people at the Federal Reserve and Treasury argued that the United States had experienced a financial mania (true), that a fall in asset prices was long overdue (quite likely, at least for stocks), and that the right approach was to stand back and – in the unforgettable words of Treasury Secretary Andrew Mellon — let the private sector “liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate.” (The exact wording of Mellon’s quote is according to President Hoover’s account, but this was Mellon’s general view; see p.445 of Mellon: An American Life, by David Cannadine).

The result was the Great Depression. No responsible policymaker would want to run that risk again.

Supporting banks by injecting capital is best practice for preventing financial and economic collapse around the world. It was, by the way, not the idea of then-Treasury Secretary Henry Paulson – he wanted to have the government buy up “toxic assets,” an idea that never really got off the ground (too complex, too easy to abuse and inherently nontransparent in deeply scary ways).

It was Representative Barney Frank, the Massachusetts Democrat, who insisted that the Treasury receive the power to provide capital. Within a week of the legislation’s approval, this was the main option on the table and has remained front and center of what the government did in fall 2008 and January 2009, and what it could promise (or threaten, depending on your perspective) to do after the stress tests of spring 2009.

But three serious mistakes were made in the implementation of TARP.

First, there was no need to be so excessively generous to the financial executives (and their boards) at the institutions that had to be saved. In part this generosity was due to insufficient safeguards in the legislation (a point Ken Feinberg makes persuasively with regard to compensation), but mostly this was a choice insisted upon by key people in President Obama’s economic team.

The bankers were not even embarrassed by what happened – this was extraordinary, probably unprecedented and completely at odds with what the very same administration officials had advocated when their advice (and money from the United States and the International Monetary Fund) was needed by other countries (we cover this in detail in Chapter 2 of 13 Bankers). The historical record on this point is not in question.)

Second and closely related, the Obama administration missed the opportunity to change the structure and the incentives of Wall Street when it had the chance, at the very beginning of 2009. The Treasury line, then and now, was that the “essential functions” of the financial system had to be preserved, and this meant no one could be “punished.”

This is again a complete divergence from best practice, for example as recommended by the I.M.F. (with United States backing) in many situations over the last 50 years. The issue is not punishment or retribution; it is responsibility – and it provides incentives to be careful in the future. (Again, for more technical details, see 13 Bankers.)

Failing to seize an opportunity for reform is not sophisticated or the work of adults (as some members of the Obama administration self-servingly assert); it was simply a political mistake – and terrible economics. The idea that some banks were too big to fail arguably played a role in the run up to 2007-8; we can have that debate. But the notion that our biggest six banks are untouchable today is uncontroversial.

Their creditors know this, so these banks can borrow more cheaply than their smaller competitors, they can become larger relative to the economy, and if you doubt the risks that this poses, just look at the situation today in Ireland.

Third, by the time the administration put forward its financial reform ideas, the big banks were back on their feet – and ready to throw huge numbers of lobbyists and unlimited cash into the fight to preserve their right to take inordinate risk and to mismanage their way into disaster.

The administration’s proposals were weak to start with and were diluted by the House of Representatives (with a very few holding actions, most notably by Representative Paul Kanjorski). Surprisingly, and against great odds, the legislation was not gutted in the Senate – due primarily to the efforts of Paul Volcker (from the outside) and Senators Kaufman, Levin, Brown, and Merkley, the reforms became a little bit stronger. But the Dodd-Frank Act, while including some sensible consumer-protection measures, essentially does very little to reduce system risk as we move into a new credit cycle.  In particular, there is nothing that ensures our biggest banks will be safe enough or small enough or simple enough so that in the future they cannot demand bailouts – the bailout potential exists as long as the government reasonably fears global financial panic if such banks are allowed to default on their debts

Where do we stand today, with the Financial Stability Oversight Council meeting for the first time tomorrow? In a devastating speech last week, Mr. Volcker hit all the nails on the head – our financial system is badly broken. This will lead another runaway mania and another awful collapse.

Read the farewell speech this weekfrom Senator Ted Kaufman of Delaware to the Senate. Drawing the right lessons from the crisis and looking forward, with particular concern for the way “high-frequency trading” adds an extra level of opaqueness and risk to the system, he makes an impassioned plea for what is, in effect, a more pro-business approach (indeed, it’s in the interest of almost everyone engaged in the financial system).

“We cannot afford regulatory capture, nor can we afford consensus regulation, not in any government agency,” he said, especially the Securities and Exchange Commission, “which oversees such a systemic, and fundamental, aspect of our entire economy.”

He continued:

“[I]f we fail, if we do not act boldly, if the status quo prevails, I genuinely fear we will be passing on to my grandchildren a substantially diminished America – one where saving and investing for retirement is no longer widely practiced by a generation of Americans and where companies no longer spring forth from the well of capital flows that our markets used to provide.”

TARP is gone, but we must not forget its lessons.

An edited version of this post appeared this morning on the NYT.com’s Economix blog; it is used here with permission.  If you would like to reproduce the entire post, please contact the New York Times.

56 thoughts on “TARP Is Gone – But May Soon Be Back

  1. It is not entirely irresponsible to suggest that banks should have been allowed to fail, many and several. That the financial indicators would have looked ugly is really no problem. Of course they would have looked ugly! We would have been tearing down a house of cards created specifically to generate cute financial figures. The FDIC could have been bolstered to keep individual depositors solvent -that didn’t exist in the ’29 crash.

    Now, because of TARP and other corrupt strategies (in essence), we are still putting all our weight on a broken system whose sole purpose is moving money from productive industry to futile cycles among banks – and to their managers and staff.

    We could protect saving – but not investing as the stock market robber barons promote it – and allow numerous ‘banks’ and ‘insurers’ to fail in grand style. Sure, Krugman and friends would cry and wail over the collapsed edifice of their own glory, but the real economy would move out of the shadows of a 4 decade bubble that corrupted all the statistics used to track the economy as a whole.

  2. “The first draft of its history, looking back over the past two years, may be this: TARP was an essential piece of a necessary evil – that is, it saved the American financial system from collapse — but it was implemented in a way that was excessively favorable to the very bankers who had presided over the collapse.”

    For the sake of argument, let’s say that TARP wasn’t necessary and the big banks could’ve failed without a collapse of the financial system. Do you really think “the very bankers who presided over the collapse” would’ve just taken their lumps, or, would they have tried to get bailed out? If the latter, how would they have gone about getting this bailout? Does it not stand to reason that the best way to do so would be to scare the hell out of everybody by saying the entire financial system would collapse?

  3. In quoting what Mellon was supposed to have said to him, wasnt Hoover dismissing that view point and indicating he took a different tact?

    I think it is bad history to say that “The result” of Mellon’s view “was the Great Depression.”

  4. TARP was an essential piece of a necessary evil – that is, it saved the American financial system from collapse.

    I agree with every word of this except “necessary”, except from the point of view of the finance tyrants.

    People who are opposed to bailouts of any kind like to argue that TARP was not really necessary. Banks could have been allowed to fail and the economic fallout around the world would not have been so dramatic.

    I love the elitist populist-bashing condescension of “like to argue..”

    We citizens do argue that the effects of letting the system destroy itself would’ve been nothing less than economic and political liberation from history’s most insidious tyranny.

    Indeed we should’ve not only allowed the banks to fail, but seized the opportunity to affirmatively finish the job. That’s what the people voted for in 2008.

    Meanwhile the economic fallout on Main Street would’ve been far less vicious than the Permanent Depression to which we’ve condemned ourselves with our passivity in the face of this crime. And the kleptocracy intends to compound the crime far beyond this. The Bailout is the permanent regime, “austerity” is meant to steal the last few pennies they missed with the Bailout, and from there we’re to be restored to feudal slavery.

    Instead, we could’ve dedicated our resources to bolstering Main Street while we finished off Wall Street. Community banks and credit unions, receiving any necessary government backstopping (far less than the Bailout would’ve sufficed), could’ve provided all necessary services. The government could also have temporarily propped up any necessary corporate paper progam directly instead of continuing to launder it through the big banks. This would have been a temporary bridge to a definancialized economy, as we quickly wound down financialization, globalization, and all corporate welfare. Then we’d wind down the government itself. We’d have achieved freedom.

    The first draft of its history……

    As we can see with posts like this, a current propaganda weapon of the Bailout America regime is to say the TARP = the Bailout, the Bailout has ended, it was all necessary, and the most we need to do from here is undertake some “reform”.

    But the truths are that this is permanently Bailout America for as long as we submit to its tyranny, the Bailout will and must continue in perpetuity since the banks are insolvent and their continued existence and power depend completely upon it, and there will never be reform under this kleptocracy.

    The one and only road to freedom remains the same as it was in 2008 – break free of the finance sector’s tyranny by whatever means necessary.

    This struggle over the “first draft of history” is one of the battlefronts. This is of course not “history”, but very much a current event. We’re discussing the present and future, not the past.

    But calling it past history is one of the enemy’s weapons.

  5. In the TARP post-mortem, it would be nice to evaluate, (of course with the benefit of hindsight) the claims that were being made at the time to justify the original authorization of the program.

    Specifically, it was claimed that the “mart-to-market” valuations of certain assets had become erroneous due to “market failure”, and panic, fire-sale pricing, and an impassable spread between buyers and sellers.

    The assets “were really going to be worth much more than that in the long run, as everybody knows”, but the banks couldn’t actually sell them because that would force them to take immediate dramatic hits to their balance sheets which would show them to be insolvent and require them to raise huge amounts of capital in an impossible time (impossible, because, you know, creditors believed they were insolvent and weren’t willing to throw good money after bad and have their debts immediately hair-cut).

    Ah, but wait! It’s been over two years now! We can’t *quite* know the non-intervention counterfactual, but let’s assume the assets would have paid out fairly similarly.

    We can see, then, whether or not the collapsed bids given for these assets at the time actually made sense for the actual future cash-flows of the products. Who was closer, the bids or the asks? My hunch is that it was the bids, and the asks just hit the “solvency-floor” regardless of their relationship to reality.

    If the bids were closer than the asks, and the banks just held out for time and government help, then TARP was simply a GIGANTIC FAILURE compared to the other alternatives available at the time – for instance, nationalization, or the freezing of creditor’s collateral assets, creating a resolution trust-fund facility, which paid out years later when the dust settled according to the normal legal rules of priority and without ad-hoc improvised moral-hazard-creating guarantees.

    So, who’s gonna get that analysis?

  6. Checking Hoover’s memoirs, Hoover declared that Mellon’s view was opposed by key policy makers — Under Secretary of the Treasury Mills, Governor Young of the Reserve Board, Secretary of Commerce Lamont and Secretary of Agriculture Hyde. They felt that “we should use the powers of government to cushion the situation”. He goes on to write “we determined that the Federal government should use all of its powers…to cushion slowly, by various devices, the inevitable liquidation of false values” (among other things). Sounds TARP-like.

  7. “TARP is gone, but we must not forget its lessons.”

    I would have phrased that differently, I think. “TARP is gone, but if we continue to be complacent about the role of both government and large institutions in our day-to-day economic lives, it will be back.”

    TARP was set up to be favorable to those people and institutions who invested heavily in its outcome. And isn’t that the way things usually proceed? The public, caught up in its own undirected panic, looked for someone who promised to be a good shepherd — forgetting that shepherds are masters at fleecing; and that they eat mutton, too.

    We, as the body of the public, allowed ourselves to become chained to these large institutions and gave them the only key. If we started to sink into the quicksand, they could simply unlock the shackle from their own wrist and let us drown. But when they started to sink, they were able to blackmail us into pulling them out – after all, they could ensure that we went down with them (or at least we feared they could).

    Capitalism, like democracy (representative or direct) is not a game for the passive. We didn’t need the TARP program to tell us that. But we had already developed a collective tendency to ignore every event that told us that in the past. And I don’t think that the TARP, love it or hate it, could shout loud enough to get us to listen now.

  8. Several things if the U.S. economy is to turn around and gain growth: advancing policies put forth by the Obama administration to level the playing field in several areas; namely U.S. trade with China, allow renminbi to float with markets, further bank reforms, target spending, and letting the tax rate for the top 2-3% of the wealthiest lapse (if they haven’t already off-shored their bank accounts). The professional Left are gleeful that Summers, Orszag, and the probable leaving of Blue Dog (cheerleader) Rahm Emanuel have exited. I would suggest Laura Tyson to replace Larry Summers but she is too leaning like Elizabeth Warren, so President Obama will look more towards business guru, Jeffrey Immelt. Mr. Immelt short bio: “Chairman and CEO of General Electric since 2001. Immelt is also a member of The Business Council and is on the board of the New York Federal Reserve Bank.”

  9. I don’t come to this site to read about the Great Depression bogeyman. Hard to believe that Mellon’s advice (which was not followed) led to a Depression in Europe and a banking crisis 4 years later in the USA.

    The TARP serves as a perfect example of our failed legal and regulatory structures. Defending TARP only perpetuates those failures…

  10. “excessively favorable to the very bankers who had presided over the collapse.”

    This is a complete myth being perputated by the left. Simon Johnson’s lies all over again.

    it is a good thing that kwak has relegated himself to commenting on customer service problems.

    – Goldman Sachs was dragged through the mud for no good reason even tough that they were forced to take tarp.
    – the industry got back-breaking regulation that is going to remove them from global competition for the foreseeable future
    – the irresponsible average american who participated in the crisis WITH the banks got away scott free for their irresponsible decisions and blamed the ‘fat cat’ bankers.

    So Johnson lies again about the ‘favorable’ treatement of bankers. hard to believe that kids that go to MIT are paying for his garbage.

  11. Will Banks Take A Second Bite From Government’s Carrot?

    September 28, 2010 – excerpts

    “Community banks will soon have access to a $30 billion pot of capital from the federal government, thanks to a bill signed into law yesterday. The idea behind the fund is to entice smaller banks to open the spigot of small business lending a little wider. But the success of the so-called Small Business Lending Fund hinges on two main factors: whether there is enough demand for small business loans from qualified borrowers to warrant banks’ participation and whether community banks still have a bad taste in their mouths from the last time they took money from the government.

    “There are certainly some who will say this is ‘TARP II’ no matter where the funds come from.”

    ….. word on the street is that regulators might have the fund’s rules written in about 60 days. The fund is part of the Small Business Jobs and Credit Act of 2010 signed into law yesterday. ”


  12. TARP was theft in plain site. The second draft of history should look at in the Treasury and the Congressional staffs later wound up working for the affected companies. And the Great Depression analogies ignore one critical piece of reform from that era that has not been touched, individual deposits are now federally insured. The next time this happens, a bailout w/ will be politically impossible, the mega-banks will fail, regional banks will take their place, and the average American won’t notice a damn bit differnce.

  13. “global competition”??

    You mean Merrill Lynch won’t be able to compete with Royal Bank of Scotland?

    Tell us more about how Goldman was forced to become a bank holding company (over a weekend) and how average americans then also all became bank holding companies and how we all now borrow at zero percent courtesy of the Fed….

  14. Re: @ RickK___Let’s hope it doesn’t mirror the “Refinance Home” debacle – where every homeowner in the country is under(equity of homes drastically depreciated) water on their mortgage principle…and certainly can’t leap high enough for the golden-carrot to qualify – making null-n-void this pie-n-the-sky nonsense! These SME’s have lost equity in their business I would assume,and the regulatory/qualification via paper jam is highly probable with this administration? There is hope if Warren/Frank and others can have some imput (highly unlikely though). But let’s keep a stiff-upper lip and a smile underneath.:-))

  15. Simon wrote: “The result was the Great Depression. No responsible policymaker would want to run that risk again.”

    Well, I guess that depends, does it not? I mean…suppose for a moment the TARP bailout, finally, solidified power grab in the nation by a corrupt Oligarchy. I’m not saying it did, or it did not. But, for the moment, suppose it did. Suppose it would have been better to bring the Temple down on itself? You might be in a situation where you risk a Great Depression, but keep a Republic, flawed as it is. Just saying maybe……

    Personally, I would have rejected TARP simply because the people primarily advocating it were the same people who drove things to the point where they could walk into a meeting and tell the assembled multitude that if they, the multitude don’t ‘give us our way’ the entire financial system of the US will collapse. Especially since they had arrogantly dismissed just about any criticism that something bad was afoot in the system.

    There and then they should have been deemed incapable of a further role in the crisis. Whatever the cost of losing their ‘experience’.

    And the legal investigations should have begun right there and then. At least Iceland seems to have gotten that part right. If little else.

  16. It’s bad form to call other people’s positions lies. I am sorry to hear that you believe that the regulation imposed on the banks is back-breaking. I haven’t heard such language from them and clearly by some of their neglectful behavior, they brought the re-regulation on themselves.
    A lot of average Americans have suffered severely: losing all their equity in a home when it is foreclosed, being out of work because demand is down, being reduced to poverty, etc. But then homelessness, unemployment, and poverty are merely visited upon those who deserve it. Now you tell, what is a lie?

  17. Re: @ tinbox___Andrew Mellon was a diabolical tyrant, period! The Mellon Family lineage goes back to Andrew’s wife who was a heiress to the Guiness fortune which opened doors for Andrew to become a confidant of the Windsors when he was US Ambassador to London also known as the “Court of St. James” in 1932 and 1933. Mr. A. Mellon was three times US Secretary of Treasury under President Harding,Coolidge, and (Hoovers British connections) Hoover…while always representing “Englands (Black) Nobility” interests. He financed the “Aluminum Cartel” (monopoly) known today as ALCOA to control the price, and supply of aluminum. He was involved in Oil (Gulf Oil), Gold/Diamond Mining ,and questionable illicit (back then opium/heroin was?/ parts of the world) drugs. Gulf Oil worked closely with British (BP) Petroleum (formerly Anglo-Persian with Rockefeller/Standard Oil ties). Andrew Mellon also bandied about as a co-conspiritor behind the “Dawes and Young Plans” which financed the Nazi war machine and caused the economic collapse in Germany that brought “Adolf Hitler” into power (Ref: “The Robots`Rebellion” for the full story of this man ambitions ). They certainly were not in America’s interest and Hoover went right along til the very end…as any modern day “Power Broker President” does! Oh, by the way,…it’s all in the family – his son Paul Mellon is also a central figure in the London-Base Aristocracy (oligarchy) control of the United States, rubbing elbows with another incredible plethora of oligarch families – that being the Rockefellers, Harrimans (Bush Family lineage),Kennedys,and Morgans which is based in New York,Virginia, Washington D.C., and Boston (Mitt Romney , remember that name?). This cabal financial cadre is what is known as the “Eastern Establishment, with the ??? ,and others…finger prints all over it influencing our “Federal Reserve” to this date! Ref: http://www.nyc-architecture.com/UES/UESO50.htm Thankyou,Simon and James for the “Great Digging” :-)

  18. Yes, I have to admit my heart leapt a little leap when I read of the indictment in Iceland. Future foreclosures need uncompensated write-downs, and the lenders need to take some lumps. This will translate into devalued savings for many Americans, but the attempt to reinflate real estate with government backing is throwing good money after bad. All to preserve a gamed system with the fable of venture capital being contingent upon it, i.e., shut us down and you shut down economic growth. In short, it was a hostage situation and DC caved, quite badly. Scoundrels took the best positions once the outcome was known. The little guy investor could not compete against that.

  19. For month after month, for nearly three years now, I’ve wondered what horrific scene Paulson, Greenspan, Bernanke and others saw from the event horizon upon which they stood. What exactly did the end of the world as THEY know it look like from their perch, peering into the black hole of financial destruction?

    I guess I’ll never know. I’ll wonder though, as I drive through my small midwestern town where 75% of the business community, once thriving, is now for lease or for sale. Shuttered. I’ll wonder how much more horrible the view could have been back then through the eyes of my award winning architect wife who hasn’t had a day’s work for the past three years.

    I’ll try and remember what it was like to have work myself back then as a contractor, and for three and a half decades before that moment, before my little world of self employment came to a grinding halt.

    Now, after the upcoming sheriff sale of our home and trying to figure out what and where we can go after a perfect equity stripping and butt kicking by these same TBTF banks, I’d really like to know how bad the view was. Was it terrible?

  20. A good enough summary, but with two glaring omissions: As the class-biased rescue unfolded, reformists like Prof. Johnson told us that things could be otherwise; and when the next crisis comes they will say the same thing, and again be proven wrong.

  21. Simon, spot on and cogent, as usual. But, I would argue that it is the capture of our government by the rich and by the powerful corporations under their purview that has set in motion only the first of the long term denigration of America which is happening in our time and right before our eyes. Compared to any external threat that this country has ever had, this toxic plutocratic control of our lives is at the very root of all of America’s public evils.

    Aside from the take over of our financial well being by a literal handful of financial oligarchs, America is beset by problems from stem to stern, all contrived and foisted upon us by this same set of wealthy and powerful American globalists. We can talk about drugs, the MIC, the trade imbalance, the completely off-kilter system of taxation, or whatever else in our toxic world you choose. TARP is nothing but the tip of an immense iceberg looming just under the surface of our culture and awaiting our doom. If you actually believe that any person, party, movement, or tide will somehow move this country in a direction which positively affects the lives of the American citizen, you are fantasizing. Sorry, but take a little time to consider, and maybe you and the contributors will see that the problem with our government and our country is that we are no longer represented by individuals who actually care about anything but their next election or anyone but themselves.

  22. Republican Congressman John Boehner would like to play some game of revisionist history. When his party held the White House for 8 years and led this country jet-powered into the toilet, they knew if they didn’t vote for TARP, America would be a wasteland before President Obama had gotten the Oval Office seat warm. Then TARP was worth a “B” acting performance of misty-eyed love for TARP. Now when a Democrat is back in the White House and he can get the House Leadership by watching the country languish in futility and doing nothing, Republican Boehner doesn’t want to have anything to do with it. HEY, REPUBLICAN JOHN BOEHNER, THERE IS A NEW THING CALLED VIDEO, and C-SPAN, SUCKS TO BE YOU

  23. I think this guy “SJ Needs Internship” is on Republican Dick Shelby’s kiss the ABA’s (American Bankers Association) anus staff. I see big things for him in the future. I just hope he and Shelby don’t pick up hepatitis.

  24. I just read your story to everyone at the post-dinner conversation table. Our hearts go out to you. Your story (and millions more not making it as “news”) has been confirmed by one of the people at the table who just drove cross country, taking every exit on to the original Route 66. He said it was “depressing” – and confirms 75% of Route 66 small businesses are as you described.

    From Moon Walkers to this has no LOGICAL explanation.

    Before the sheriff comes, demand to know who holds the mortgage note.

  25. “No responsible policymaker would want to run that risk again”

    You are attributing what a responsible policy maker would want to do. If so then it is more responsible to ensure such bubbles do not occur. IF you cannot do that then the only alternative is to let the system crumble (if it will) and make way for a better system.

    Such nonsense that if the banks are not bailed out the world would come to an end is just called “Fear mongering” or “Blackmailing” so that you achieve the main result of bailing out the banks (and screwing the tax-payers) in the guise of saving the nation. It is a CON Job well done!

  26. Re: @ Bayard Warerbury___#1 “Term Limits….#2 “Anti-Redistricting Laws (Jerrymandering Abolished -forever!)….#3 Independent Parties {(running Head-to-Head with “Old Dead-End `Two Party` Democratic System”)(splitting the vote is a fallacy, when both are cut from the same cloth)}…..#4 Primaries ( Wide-Open – all political affiliation endevors must be regulated equitably – more or less a flexible/fluid regulatory procedure, and with open transparency)….#5 Repeal, “Supreme Courts Ruling” funding from Corp./Unions! Unless we prefer to sit back and take our daily beating…thus crouching down in the corner cowardly with a…this is our fault stigmatation, fostered by decades of “Inferior Societal Complexion Syndrome”…pathetic!!!

  27. TARP got its bad name simply because the public – and many Congressmen – lump it with the vastly bigger and more controversial “Stimulus Bill”. TARP also got negative publicity from his own creators when the Obama Administration decided to demonize Wall Street.

    But even tough TARP has had its problems they shrink in comparison to the great failure that the Stimulus Bill represents. They both share some policy mistakes but it all can be understood better by exposing and explaining WHY these programs are so devilishly harmful for the American economy.

    Much has been written about it but none have managed to stick in the minds of the majority. This could change by the piece called “Stimulus for Dummies – Bunnies, Widgets and Holes”. It is necessary that professionals, as well as the average voter, read this concise presentation that states at one point, “It is a supreme example of ‘uncreative destruction’ that will degrade any nation engaged in it.”
    Published today at http://www.robbingamerica.com

  28. Here’s a radical idea:

    The TBTF banks are goners, and they helped cause this mess. Why do we keep giving them money? It just vanishes down a black hole of greed and corruption.

    Next time we have TARP, set up a new bank that the American people can deal with directly, or identify the small banks in good shape and give them the money, or give it directly to the American people. As the conservatives love to say, it’s their money, they know best how to use it.

  29. “We, as the body of the public, allowed ourselves to become chained to these large institutions and gave them the only key. If we started to sink into the quicksand, they could simply unlock the shackle from their own wrist and let us drown. But when they started to sink, they were able to blackmail us into pulling them out – after all, they could ensure that we went down with them (or at least we feared they could).”

    BS. Talk about revisionist history. 80% of the public said no to TARP, from far right to far left and everythone in between. Our ‘representatives’ voted for it anyway.

  30. Frankielee, your four paragraphs are the most important I have read on this whole damned blog.

    SIMON, JAMES — Do you even read these comments???

  31. Wow.

    Wow, again!

    Why don’t I read this stuff in the NY Times — or the WSJ — I wonder.

    Don’t know if I’m more enamored of you or Bayard. …..smile. ….Lady in Red

  32. New definition for “automatic withdrawals” from Anne Pettifor’s article, in part, “….But how many Americans understand how broken and defective the banking system as a whole has become? For the crazy facts are these: bankers now borrow from their customers and from taxpayers. They are effectively draining funds from household bank accounts, small businesses, corporations, government Treasuries and from e.g. the Federal Reserve. They do so by charging high rates of interest and fees; by demanding early repayment of loans; by illegally foreclosing on homeowners, and by appropriating, and then speculating with trillions of dollars of taxpayer-backed resources.”

    One big bowl of crazy…math and science as weapons of mass destruction….

    It’s all a game without a way to “win” other than to cheat and steal and without a time limit on how long to play….

  33. “The issue is not punishment or retribution;”

    All we are saying, is give punishment and retribution a chance (sung to the tune of ‘give peace a chance’)

  34. Since it’s true, it’s therefore not “news that’s fit to print”.

    (I don’t recall if the WSJ also has a cool slogan, but at any rate they’re liars too.)

  35. “It was the best of times, it was the worst of times. . . it was the season of Light, it was the season of Darkness… we had everything before us, we had nothing before us, in short, the period was so far like the present period … ”

    Charles Dickens (English novelist, generally considered the greatest of the Victorian era, 1812-1870)

  36. The Fed Is Dead, Maybe By 2012

    Oct. 5, 2010 · Market Watch – excerpts

    Commentary: A magic metric that predicts America’s future

    (MarketWatch) — “OK, so Nassim Nicholas Taleb, the “Black Swan” author, actually said: “The Fed won’t exist in 25 years.” Warning: It’ll happen much sooner, fallout of the coming Second American Revolution.

    It’s inevitable: Wall Street banks control the Federal Reserve system, it’s their personal piggy bank. They’ve already done so much damage, yet have more control than ever…

    Here’s Taleb’s “simple metric for judging whose economic opinions are worth his time: ‘Did someone predict the crisis before it happened” in the past? “If the answer is no, I don’t want to hear what the person says. If the person saw the crisis coming then I want to hear what they have to say” about future crises.

    So who can you trust? Nobody, not me, not even Taleb. Why? In the final analysis the Buddha said it best: “Believe nothing, no matter where you read it or who has said it, not even if I have said it, unless it agrees with your own reason and your own common sense.”

    Unfortunately, America is losing its capacity to reason, its common sense, its values, its vision of the future. More of us need to trust Taleb’s “simple metric.”


  37. “In that giddy whirl of noise and confusion, the men were delirious. Who thought of money, ruin, or the morrow, in the savage intoxication of the moment?”

    Charles Dickens….Nicholas Nickleby

  38. The environmental pollution is criminal. But, of course, nothing is “criminal” when the “criminal” write the laws.

    More misery for others = More money for ME ME ME

    What a bunch of pigs who obviously never had to clean up any mess they ever made as two year olds to learn a basic lesson about the “material” world.

  39. It was Representative Barney Frank, the Massachusetts Democrat, who insisted that the Treasury receive the power to provide capital?

    This is not accurate. Treasury, while preferring asset purchases, sought language to permit capital injections.

    Thus, “troubled assets” were defined to include:

    “any other financial instrument that the Secretary, after consultation with the Chairman of the Board of Governors of the Federal Reserve System, determines the purchase of which is necessary to promote financial market stability, but only upon transmittal of such determination, in writing, to the appropriate committees of Congress.”


  40. “The Bond Bubble Metamorphus Commeth”, but not as we expect…nothing is as it seems? It will be a gradual,methodical, and quasi postmortun anomaly…a biaxial symmetry transfer, transforming a opaque obviated coefficient via decompression convergence. Sorry if it sounds complex, or overbearing, but? The process will metasasize quintesentially as the laws of equillibrium come into reality, where time being the only variable. We will witness the grandiose laws of physics, and the financial world in unison, experiencimg the gravitational pull of rationale` towards the center…righting itself once again. Those wonted animal spirits that only the “Bond Ghouls” possess with innate wild throws of volatility, soon will be brought down to earth with the unpleasantness of vertgo gone predictably, yet spontaneously mad. Enough with the talk. Here’s how it unfolds – as the biaxial transfer begins at one end, letting the bubble deflate as displacement occurs, the other end introduces a very fine gold dust – quite similar in atomic weight to the air discharged until the bubble is deflated of all deflation, and maintained with a solid mass of compressed gold dust with the parameters of circumference, and length fully stabalized, and sealed…whereas what follows is a soft descend to planet America. Thus the bubbles measured fall too reality under the weight of a fiscally sound “Gold Sphere” that was once lost in the stratosphere of ignorance, now virtually transformed into a fiscally responsible entity that will be ours to chase around for awhile!

  41. Further, the debt would have been repriced and purchased. People who are now losing their homes because they lost their jobs would have gotten a phone call from a Main St. bank saying, “By the way, I bought your mortgage at 50% and here is your new lower payment.”

    Real estate pricing would be finished by now. The large ‘investment’ banks would be gone, whose only contribution to the 21st century is the ATM machine.

    Clearing those banks out would have redefined politics, K Street, and regulation all in one swoop. I was looking forward to that. Now the taxpayer is worse off than before this mess hit the fan.

    But the worst product of the Bail-out was that it showed Keynesian economics and the bureaucracy for what it is; a slanted game they can’t win. Beware the corruption that ensues, and the lack of enthusiasm by a populace who worked like hell for a decade and lost it all to the banks using their own money against them.

    Lastly, this post is written too early. For the banks are still bankrupt. And the real estate has not even begun to clear. And the whole thing could still collapse.

    But what is very sure, is that until all that toxic crap is cleared off the books, the economy will never recover. If you have ever turned around a company, trying to run it is impossible unless the Balance Sheet is cleaned up.

    That is the ‘problem’ with the Bail-out. It prevented the haircut. And it is a giant moral hazard of a haircut that has yet to take place.

    If I was a house owner who lost his job because large banks sold their soul, and then they called me to foreclose on my house using my tax money to stay afloat and get richer, I’d be screaming bloody murder.

    The Bail-out was necessary? You got to be kidding.

  42. Exactly.

    And the public that were watching with even half an eye were screaming at their representatives to wind down Fannie and Freddie for a decade.

    This post, like the author’s OP, is silly.

  43. It doesn’t matter where the next round of TARP goes. The trillions of dollars spent or loaned to the large banks by the government and the Fed was meant to do one thing; preserve their debt and the market values they represent.

    Until that debt is repriced, or is paid off, this economy is going to suck. Take your pick.

  44. I’m sure George Bush loves this big wet kiss! Rewriting history, eh? Obama’s fault & his economic advisor. He wasn’t the friggin prez when this stuff went down. I’m used to you blaming Obama for everything that has happened since he was born, but this is a bit much.

Comments are closed.