The Obama/Geithner plan could rob the taxpayers to pay off the banks.
Of course, “robbing the taxpayers” seems to be the general theme of this administration.
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The Obama/Geithner plan could rob the taxpayers to pay off the banks.
Of course, “robbing the taxpayers” seems to be the general theme of this administration.
Comments are closed.
I thought that a war on investors was the theme of this administration. But the market’s up this week, so they must have changed themes.
I seem to recall that George H. W. Bush robbed taxpayers to pay off the S & Ls, that Clinton did it to clean up for Long Term Capital, and that George W. Bush did it with TARP. I honestly wish we could just tell the banks to take their lumps, but however satisfying emotionally, that sort of altruistic punishment would leave the taxpayers even poorer.
So Jim, you are using strawmen on yourself? A war on investors would be robbing the taxpayer too so that strawman doesn’t even fly. Here’s a question. If the economy is the number one issue, and it is, why are there 17 appointment level positions still open in Treasury? Timmy is obviously out of his depth. Getting him some help should be a priority unless you don’t want others getting in the way. Don’t try and spring the “Economic council” either. They are NOT government. They are “advisors” with no responsibility and cannot do the jobs actual government employees need to be doing.
Sure the market is up. Economic data is better than the gloom and doom Obama was spouting from day one. Gee, he tells us things are really, really bad then when it turns out not to be true, investors come back and people like you say, see the market is up he’s doing as good job. Bank stocks are going to go up because they get to shaft us with the government’s help by shedding bad assets. Of course some of these proposals are unconstitutional(the geovernment has no stautory power to seize non bank assets) and are nothing more than a power grab we will pay dearly for down the road.
“I honestly wish we could just tell the banks to take their lumps, but however satisfying emotionally, that sort of altruistic punishment would leave the taxpayers even poorer.”
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So, your admitting then that the Democrats are all in favor of helping the rich greedy wall street bastards stay rich?
I thought the Dems were supposed to be about helping the little people. If a bank going down makes the tax payers poorer, then bailout the tax payers, not the mega corp. Here again, we go back to where the money would help the most. For the amount of money being funneled into the credit markets, we could divvy up tens of thousands of dollars per person.
I thought markets were supposed to periodically fluctuate? It is the investors that choose their level of risk and ride the waves to possible profit. The more risky the investment the higher the yeild yet the greater the possible fall. This is the risk/reward feature of investment. A flat market isn’t going to be particularly all that exciting and therefore won’t see the same type of cash flows as a market with higher variability.
Josh: Yes, Democrats are willing to help greedy Wall Street bastards if the alternative is leaving everyone poorer.
The problem with letting the banks and AIG “ride the waves” is that they have taken on more downside risk than they can absorb, so it wouldn’t be just them going under — they’d be taking us with them.
Plus, we need banks — they’re a critical piece of the economy.
Jim says: The problem with letting the banks and AIG “ride the waves” is that they have taken on more downside risk than they can absorb, so it wouldn’t be just them going under — they’d be taking us with them.
Downside risk they were forced to take by Congress.
The problem with letting the banks and AIG “ride the waves” is that they have taken on more downside risk than they can absorb, so it wouldn’t be just them going under — they’d be taking us with them.
Ha ha, yeah right. So how come that didn’t fly with Lehman Brothers, Jim? Strange, that. Or is it? Pure coincidence that Lehman was a major competitor to Goldman Sachs, from which came Paulson, and who have always been major Democratic donors? Or that the institution to which AIG, the most massive bailout recipient, owed the most money was — Goldman Sachs?
I think the “problem” here with letting AIG, for example, “ride the waves” is that there’d be a lot fewer donations coming into Democratic Congressmen’s pockets.
This bullshit about taking the economy down with them: give me a break. I recall Chrysler going bankrupt. Pan Am, United, and many other airlines. New York City once. I don’t recall the economy unwinding because a big firm goes into bankruptcy and has to get re-organized. You speak as if going bankrupt or out of business means all the bank’s assets (including the talents of its staff) just vanish, poof. Which is stupid. A corporation is not a life form. When it “dies” its component cells don’t die. They just get re-organized some other way. People quit Bank A, which has gone under — and go work at Bank B, which has not.
Pllus, we need banks — they’re a critical piece of the economy.
RIght, Jim. But not necessarily these banks. Others, better run, e.g. Wells Fargo — banks that don’t contribute fat sums to Democrats — will do just fine, actually.
Furthermore, outside of your collectivist fantasy world, where everything we “need” has to be set up and maintained by our wise government, there is this odd thing called an entrepreneurial-friendly free market. If we need more banks, then some clever fellow will set one up, all by his lonesome, using some of that evil capital you haven’t yet managed to tax away, and then people will use his bank, he’ll make money, and everyone is happy.
And — here’s an even more amazing thing! — if he doesn’t do a good job, if he’s an idiot, we don’t even need to fire up a Congressional hearing, or set up a hugely expensive “regulatory” regime to monitor and fine him, have him fill out forms et cetera. What happens is that people stop giving him their money and he goes out of business, releasing the assets he’s organized — capital, talented labor — back into the pool, to be grabbed up and re-organized by someone else. It’s recycling! Very green!
Isn’t it amazing, the thought that people can solve their own problems without a complete set of instructions from Thought Control Center? It’s almost…as if the world actually functioned for the 40,000 years before Barack Obama was elected.
Mac: No, Congress did not force banks to buy CDOs, or force AIG to sell CDCs.
Carl: Lehman’s failure directly resulted in a credit freeze that cost hundreds of thousands of jobs and cut the U.S. GDP. Laissez-faire doesn’t work in these situations — the loss of one bank can kill other, previously healthy banks, until you have to spend years creating a replacement financial sector. Meanwhile the economy is frozen. This has nothing to do with Obama in particular — every president since Hoover has tried to keep bank failures from turning into wider financial panics, regardless of their party or economic philosophy.
Lehman’s failure directly resulted in a credit freeze that cost hundreds of thousands of jobs and cut the U.S. GDP
Yeah? Prove it. Your Nobel Prize in Economics is waiting for you if you can. But I suspect the committee will be just about as impressed as I am with a proof by confident assertion. Id est, not.
the loss of one bank can kill other, previously healthy banks, until you have to spend years creating a replacement financial sector.
Jim, I can’t believe someone actually involved in business would make such a bizarre statement. You’re in the grips of some psychosis in which you fantasize that Some One Important — Them? Congress? The Illuminati? — directs from high above the creation and destruction of firms and activity — or even has the ability and smarts to do so.
This is, of course, garbage. It doesn’t work that way. You can’t “create” a financial sector from top down any more than you can create life. Suppose you, the government, do set up a bank. What happens next? Unless there’s a demand for the bank, and unless there is capital waiting to be invested with the bank, it sits there all day doing nothing, empty of people, a pointless lump.
And, of course, if there were capital wanting to go into a bank and people wanting to borrow from a bank, then someone — a banker, say! — would have created a bank already, provided you the doofus collection of lawyers running the government didn’t throw some roadblock in his way.
So government can only “create” anything other than its own expert product (more government) in the bogus sense that Buster Keaton can “stop” a train by pretending to push on it while it stops on its own.
This reminds me of a similar psychosis among some teachers: they believe in the existence of an abstract art of “teaching” unconnected with any knowledge of the subject being taught. They believe, for example, that you can teach mathematics if you have these mad Ed skillz without actually knowing any math. In fact (they’ll tell you), you’ll be better at it, because you know about learning, while a mathematician merely knows math.
In the same sense, you would appear to believe in a similar abstract art of government, of management of economic affairs, such that government can cause economic activity X at least as effectively as people who actually know how to do X. Government can run medicine better than doctors and health-care CEOs. Government can run banks better than bankers. Government can do anything better than any mere expert, because — well, they have the magic powr ring — government! With that kind of kryptonite, no mere expert in a particular field can do better.
It’s a weird attitude. Frankly reminds me of the medieval Catholic Church, with it’s attitude that priests and bishops should be considered the ultimate authority on everything in life, including the correct theory of physics and whether the Earth went around the Sun. Why not? They knew the Word of God, and surely no mere practical knowledge of the world could challenge that wisdom. Your similar serene confidence in your own theories pulled straight from your ass is astonishing to see in someone not carrying a crozier.
As I see it, the current bailout does nothing to prevent further bailouts of similar or greater magnitude. Further it is a hideous continuation of the “too big to fail” idea. Let me remind people of several things:
1. Private parties bought highly leveraged bad assets and are being bailed out by public money. There is no incentive to keep the culprits from repeating the process. Private profit with public risk remains a bad outcome of current regulation and government policy.
2. The bailout doesn’t actually fulfill keynesian objectives (the chief rationalization) since most of the money is not spent in a timely manner nor has much to do with the immediate needs of the bailout.
3. Job preservation (a commonly cited goal) is not an adequate or even desirable goal. First, many of those jobs should be lost because the employer is either a dying business or an ineffectual government bureaucracy. Second, how will the new businesses, that will lift us out of recession, hire people when government policies have already soaked up the excess?
4. There isn’t an urgent need to fix the problem right this minute. For example, there’s little reason not to run banks through bankruptcy court even though that can take months or years to finish. We don’t need government agencies with both the power of a bankruptcy court and the ability to act right now.
5. Conversely, I see the bailout plan postponing significant business failures. Most of the auto industry, for example, should have failed back in late 2008. The entire investment banking industry should be in bankruptcy court right now. This is an extension of the problem outlined in part 1. We are rewarding these businesses with public funds for terrible decisions made over many years. Nothing keeps them from continuing to make bad decisions, only this time with public fund in the mix.
6. Government hasn’t demonstrated that it is competent enough to implement any bail out, even if it has a good plan for doing so. For example, look at the current wriggling on the hook where the Obama administration tries to get someone to buy bad assets for well above market price. It won’t happen.
Now we get to issues more relevant to this thread:
7. The markets might have been at risk in September 2008 from systemic risk. That time has, at least temporarily, passed. Jim, here’s some questions directed to you. Why do you think banks are still so unstable that we have to prop them up? When will this period of instability end, if ever? Will it become another permanent emergency?
8. I get the impression that the current administration treats economic matters as a distraction from its other goals (universal healthcare, more expansion of education, alternate energy, etc). Hence, why the stimulus bill had so little to do with stimulus.
9. Further, I think perception follows need here. The Obama administration needs the economic crisis to be solvable by the current approach so that there’s no obstacle to its other goals (like say, the hypothetical sentiment among DC decision-makers that too much money is being spent now). I think ideological blinders prevent the administration (much as the Bush administration) from implementing a useful strategy.
10. There’s no reason to involve government in most of these activities. As Carl says, private business can run itself and fail alone. The machinery is already in place.
11. Finally, the current approach gives too much power to government. It is overseeing huge portions of the economy, it is handing out large gifts which it will obtain oversight power for, and it is adding to the debt load of every US citizen.
> No, Congress did not force banks to buy CDOs, or force AIG to sell CDCs.
It was regulators who decided that CDOs were perfectly wonderful and that the CDCs that they bought were a good idea. (Banks are only interested in holding regulator-approved assets.) It was regulators who thought that AIGs CDCs were sound.
However, it was Congress who set up Fannie and Freddie to artifically inflate the value of CDOs. It was Congress who guaranteed that problems at Fannie and Freddie would trash a lot of bank bank balance sheets by giving banks preferential treatment for holding Fannie and Freddie stock as assets.
Of course, Congress also protected Fannie and Freddie from significant regulation.
And, it’s Congress who is trashing the clean up crew at AIG. You remember the “bonus babies” – they’re the folks who didn’t screw up and are unwinding things as profitably as possible. Some of them took $1 as salary and assumed that govt would deliver the promised back-end payment.
Yup – Congress sure is the good guys here.
Yeah, as opposed to the last administration who were a model of fiscal discipline. Rand, when are you going to drop this immature partisan BS, grow up, and accept that all publicly elected politicians are crooks?
Yeah, as opposed to the last administration who were a model of fiscal discipline.
I have no recollection of defending the previous administration’s fiscal policy. I doubt if you could find any post in which I did so. In fact, I was a severe critic of it on the spending side. But this administration is making it look like a penny pincher.
What is your point?