$800 billion dollar TARP!

[Rekna]

This election season we are hearing about the cost of the TARP program which many have credited for preventing another great depression. I have often heard the quote of $700-$800 billion in lost tax dollars. But what has the true cost been to tax payers?

http://www.nytimes.com/2010/10/01/bu...01tarp.html?hp

TARP Bailout to Cost Less Than Once Anticipated
By JACKIE CALMES
Published: September 30, 2010

WASHINGTON — Even as voters rage and candidates put up ads against government bailouts, the reviled mother of them all — the $700 billion lifeline to banks, insurance and auto companies — will expire after Sunday at a fraction of that cost, and could conceivably earn taxpayers a profit.

A final accounting of the government’s full range of interventions in the economy, including the bailouts of the mortgage finance giants Fannie Mae and Freddie Mac, is years off and will most likely remain controversial and potentially costly.

But the once-unthinkable possibility that the $700 billion Troubled Asset Relief Program could end up costing far less, or even nothing, became more likely on Thursday with the news that the government had negotiated a plan with the American International Group to begin repaying taxpayers.

The rescue of the troubled insurer included $70 billion from the bailout program that was enacted two years ago, at the height of the global financial crisis late in the Bush administration, initially to prop up big banks.

At the White House on Thursday, the Treasury secretary, Timothy F. Geithner, briefed President Obama about A.I.G. and about the broader outlook for the expiring rescue program, putting the projected losses at less than $50 billion, at most. Yet neither the White House nor Congressional Democrats are likely to boast much in the month remaining before midterm elections. For most voters, TARP remains a four-letter word.

Brian A. Bethune, the chief financial economist in the United States for IHS/Global Insight, while critical of parts, called the program over all “a tremendous success. Now obviously, they can’t go out on the campaign trail and say that, because certainly, for a lot of voters, it’s just not going to resonate.”

The “bank bailout” was the first big issue, before the Obama administration’s roughly $800 billion stimulus plan and its health insurance overhaul, to stoke the rise of the Tea Party movement. After supporting TARP, several Republicans have lost elections largely because of their votes. For many Americans, TARP is more than a vote; it is a symbol of big government at its worst, intervening in private markets with taxpayers’ billions to save Wall Street plutocrats while average Americans struggle through the recession those financiers spawned.

Fewer than three in 10 Americans say they believe the program was necessary “to prevent the financial industry from failing and drastically hurting the U.S. economy,” according to a poll in July for Bloomberg News.

“This is the best federal program of any real size to be despised by the public like this,” said Douglas J. Elliott, a former investment banker now associated with the Brookings Institution, a Washington think tank.

“It was probably the only effective method available to us to keep from having a financial meltdown much worse than we actually had. Had that happened, unemployment would be substantially higher than it is now, the deficit would have gone up even more than it has,” Mr. Elliott added. “But it really cuts against the grain for a public that is so angry at banks to think that something that so plainly helped the banks could also be good for the public.”

After Sunday the Treasury can no longer commit money to new initiatives or recycle repayments to other purposes.

The Treasury never tapped the full $700 billion. It committed $470 billion and has disbursed $387 billion, mostly to hundreds of banks and later to A.I.G., the car industry — Chrysler, General Motors, the G.M. financing company and suppliers — and to what is, so far, a failed effort to help homeowners avoid foreclosures.

When Mr. Obama took office, the financial system remained so weak that his first budget indicated the Treasury might need another $750 billion for TARP. The administration soon dropped that idea as Mr. Geithner overhauled the rescue program and the banking system stabilized. Still, by mid-2009, the administration projected that TARP could lose $341 billion, a figure that reflected new commitments to A.I.G. and the auto industry.

The Congressional Budget Office, which had a slightly higher loss estimate initially, in August reduced that to $66 billion.

Now Treasury reckons that taxpayers will lose less than $50 billion at worst, but at best could break even or even make money. Its best-case assumptions, however, assume that A.I.G. and the auto companies will remain profitable and that Treasury will get a good price as it sells its corporate shares in coming years.

“We’d have to be very lucky to have both A.I.G. and the auto companies pay us back in full,” Mr. Elliott said.

Also, the best result for taxpayers could mean bad results for squeezed homeowners. Treasury has been ready to use up to $50 billion to help modify mortgages for people facing foreclosure, but its initiatives have been such a failure that little has been spent.

Whatever the final losses from housing, auto companies, A.I.G. or smaller banks, those will be offset by taxpayers’ profits from the big banks that have been the focus of their ire since 2008.

They have repaid their loans and Treasury has collected about $25 billion more from dividends and proceeds from the sale of warrants held as collateral, officials say. Many smaller banks hold on to their loans, however, reflecting their weakness and the desire of some others to keep the money given its advantageous terms. Scores are behind on dividend payments to the Treasury.

By any measure, TARP’s final tally will be less than expected amid the crisis. But the program remains a big loser politically.

On Wednesday, four days before its expiration, House Republicans nonetheless unsuccessfully forced a vote on legislation to end TARP. “We would be much better served if private institutions would either fail or be successful on their own,” said Representative Erik Paulsen of Minnesota, in an interview.

Among those who voted for the program in 2008, several Republicans have lost nominating contests for re-election or for another office, and others are on the defensive in fall races.

Senator Robert F. Bennett of Utah was “Bailout Bob” to Republicans who refused to re-nominate him for a fourth term.

“For those who were screaming at me — and screaming was the operative word — ‘You’ve just saddled our children and grandchildren with $700 billion,’ I said, ‘No, I haven’t,” Mr. Bennett said in an interview.

“My career is over,” he added. “But I do hope that we can get the word out that TARP, number one, did save the world from a financial meltdown and, number two, did so in a manner that, I believe, won’t cost the taxpayer anything. And even if it did not all get paid back, it was still the thing to do.”

Assuming that the NY times data is correct the current cost assuming no one pays back any more is $155 billion. However, these companies still owe the government $189 billion + interest & dividends.

There are only 3 possiblities with this outstanding debt. 1) The companies pay them back in full, 2) The companies go under and leave outstanding debt to the tax payers, or 3) Congress forgives their debt.

I don't see 3 happening realistically. So that leaves 1 and 2 as possibilities.
If 1) happens TARP will have been profitable by upwards of $50 billion or more. if 2) happens in the worst case the cost has been $155 billion.

So what do you think has TARP been a success or a failure? Have tax payer dollars been squandered or well invested?

[The_Dunedan]

Utterly squandered. A total waste, even if the Gov't makes something it can call a profit.

Why?

Because TARP in essence told large corporate banks that it didn't matter what they did, or what stupid decisions they made, or how they screwed their customers and shareholders: if they were "too big to fail," which conveniently never -did- get defined, they can do whatever they like and Uncle Sugar will just shake down the taxpayers for the money to bail them out. Just like every other form of Mercantilist/Corporatist welfare, it insulates bad actors from the consequences of their bad acts.

As a result of this, we -will- see this kind of chicanery again, and it -will- be worse next time.

[Baraka_Guru]

The profit will be nice to see, if it indeed does happen.

As far as your comments are concerned, Dunedan, I have to disagree in that you're making the assumption that these companies that lucked out in the crisis are now keen on the idea of planning to fail with the hope they can get more easy funding from the government to prevent untold damage.

If you think this will be their new business model going forward, you're mistaken.

You're also assuming that most customers, shareholders, and stakeholders are stupid and/or have terrible memories and/or that these companies will ignore them.

You're also assuming the government is fine with how things played out and that they probably don't need to change how things work over the long term.

You're assuming nothing has changed.

I think you're wrong. I hope you're wrong.

[roachboy]

well, there's a side of me that sees the conservative bail-out in parallel terms. except that the idea of markets being rational is absurd. as is it's correlate in the assumption that business can be understood like plants. because this is capitalism in its contemporary variant and not some fiction drawn from mangled readings of ricardo and other chestnuts of english political economy from the days of the great fantasy novels fobbed off as political economy.

my problem with tarp in the end is the way it was done---in a reactive mode by people who are ideological opposed to doing things like designing and implementing tarp. so done by conservatives, who are the worst people to be confronted with crisis because in the main they react by saying fuck it, this is normal, it's not a crisis and doing nothing. except that in this case, the bush administration could not simply do nothing because this was a crisis that involved much of the global capitalist order because so many states and major social institutions have been allowed, under conservative watches and following on conservative "thinking," to play in the Great Casino of financial devices in general and HEY! so long as it worked out, conservative "thinking" was all like "AWESOME!" but then it didn't because of that whole real estate bubble as a matter of policy thing, that whole avoidance of the political consequences of the reorganization of the economy thing, that whole creation of new and improved debt bundling devices the exact content of which no-one knew but which were rated triple a ultra excellent by standard and poor and moodys, houses brought to you courtesy of the same institutions selling these accumulations of negative numbers, and that whole fed "let's not have a clearing house or actual market-place for these derivatives because that might bum out the traders" thing (think alan greenspan, 2002)...

and everyone appeared to benefit until that appearance wore itself out and a good appearance was good enough for the asshole free-marketeers who were at the helm....who turned out to be the same asshole free-marketeers who devised the stop-gap measures the effect of which was to accelerate concentration in the financial sector...

the "principled" objections to tarp are just so much gas, predicated on no understanding whatsoever of the world of global capital flows and all that entails. it's a bit of sepia-toned navel-gazing nostalgia for the bad old days of autonomous nation-states. it's quaint. it's the functional equivalent of an amish wagon.

but i digress.


there's no way to know yet what the outcomes beyond concentration in the financial sector that will follow from this last conservative bon-bon visited upon the rest of us. it's still a bit early in the game for such evaluations.

i would have preferred far more radical regulation of the financial sector than was imposed. i would have preferred an actual policy that did something beside encourage concentrations of wealth and power. but we didn't get anything like that.

[Rekna]

Originally Posted by The_Dunedan

Utterly squandered. A total waste, even if the Gov't makes something it can call a profit.

Why?

Because TARP in essence told large corporate banks that it didn't matter what they did, or what stupid decisions they made, or how they screwed their customers and shareholders: if they were "too big to fail," which conveniently never -did- get defined, they can do whatever they like and Uncle Sugar will just shake down the taxpayers for the money to bail them out. Just like every other form of Mercantilist/Corporatist welfare, it insulates bad actors from the consequences of their bad acts.

As a result of this, we -will- see this kind of chicanery again, and it -will- be worse next time.

Would have preferred the US to go into a great depression for the next 20 years and possibly become a 3rd world country?

Also I disagree with your assertion that now banks will see this as an invitation to keep doing this. This is analogous to saying someone who gets in an accident but is unharmed and their insurance picks up the bill will try to get in accidents again because they know their insurance will cover it.....

Also don't forget that many of the banks didn't get bailed out and guarantee that this is a fear among these banks that the next time they won't be bailed out.

---------- Post added at 06:01 PM ---------- Previous post was at 05:10 PM ----------

Finally here is one more question for you DuneDan. If your neighbors house (which ends only a few feet from your house) were on fire because they were playing with matches, would you tell the fire department to let it burn because it is their own fault, despite the fact that it is likely that the fire would spread to your own house?

[Derwood]

Actually, Baraka, if you read Matt Taibbi's series of articles about Wall Street post-TARP, you will see that they continue to do exactly what they did before, and plan to continue to do it. They now have DC in their back pocket, with former Wall Street insiders in most major economic positions in Washington. The TARP bailout was a major victory for Wall Street, and they will continue to exploit everyone/everything they can as Congress bends over backwards to make sure that they are never punished and that no regulations are put in place to stop them

[Rekna]

Originally Posted by Derwood

Actually, Baraka, if you read Matt Taibbi's series of articles about Wall Street post-TARP, you will see that they continue to do exactly what they did before, and plan to continue to do it. They now have DC in their back pocket, with former Wall Street insiders in most major economic positions in Washington. The TARP bailout was a major victory for Wall Street, and they will continue to exploit everyone/everything they can as Congress bends over backwards to make sure that they are never punished and that no regulations are put in place to stop them

If you are so worried about the banks continuing the same types of risky lending then why don't we pass a financial reform bill that makes it illegal for them to do that type of lending.....

[roachboy]

can you say financial oligarchy?

[Baraka_Guru]

Originally Posted by Derwood

Actually, Baraka, if you read Matt Taibbi's series of articles about Wall Street post-TARP, you will see that they continue to do exactly what they did before, and plan to continue to do it. They now have DC in their back pocket, with former Wall Street insiders in most major economic positions in Washington. The TARP bailout was a major victory for Wall Street, and they will continue to exploit everyone/everything they can as Congress bends over backwards to make sure that they are never punished and that no regulations are put in place to stop them

Whaaaat? I was under the impression that the government was going to do something about the regulatory environment. I thought they already made some steps in banking.

I was also under the impression that near-failures in large institutions are catalysts for internal change. Of course, I could be wrong. Apparently I am.

They should change. This is why I support government regulation. It keeps capitalism in check.

---------- Post added at 02:41 PM ---------- Previous post was at 02:40 PM ----------

Originally Posted by roachboy

can you say financial oligarchy?

See, I didn't want to say it. I haven't been reading much about this issue for a while. I really thought there was going to be a re-evaluation of regulatory practices.

There isn't?

[roachboy]

not really.

this says things better than i could. it's from the turning point in the simon johnson piece "the quiet coup" from the may 2009 issue of atlantic monthly.

Becoming a Banana Republic

In its depth and suddenness, the U.S. economic and financial crisis is shockingly reminiscent of moments we have recently seen in emerging markets (and only in emerging markets): South Korea (1997), Malaysia (1998), Russia and Argentina (time and again). In each of those cases, global investors, afraid that the country or its financial sector wouldn’t be able to pay off mountainous debt, suddenly stopped lending. And in each case, that fear became self-fulfilling, as banks that couldn’t roll over their debt did, in fact, become unable to pay. This is precisely what drove Lehman Brothers into bankruptcy on September 15, causing all sources of funding to the U.S. financial sector to dry up overnight. Just as in emerging-market crises, the weakness in the banking system has quickly rippled out into the rest of the economy, causing a severe economic contraction and hardship for millions of people.

But there’s a deeper and more disturbing similarity: elite business interests—financiers, in the case of the U.S.—played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them.

Top investment bankers and government officials like to lay the blame for the current crisis on the lowering of U.S. interest rates after the dotcom bust or, even better—in a “buck stops somewhere else” sort of way—on the flow of savings out of China. Some on the right like to complain about Fannie Mae or Freddie Mac, or even about longer-standing efforts to promote broader homeownership. And, of course, it is axiomatic to everyone that the regulators responsible for “safety and soundness” were fast asleep at the wheel.

But these various policies—lightweight regulation, cheap money, the unwritten Chinese-American economic alliance, the promotion of homeownership—had something in common. Even though some are traditionally associated with Democrats and some with Republicans, they all benefited the financial sector. Policy changes that might have forestalled the crisis but would have limited the financial sector’s profits—such as Brooksley Born’s now-famous attempts to regulate credit-default swaps at the Commodity Futures Trading Commission, in 1998—were ignored or swept aside.

The financial industry has not always enjoyed such favored treatment. But for the past 25 years or so, finance has boomed, becoming ever more powerful. The boom began with the Reagan years, and it only gained strength with the deregulatory policies of the Clinton and George W. Bush administrations. Several other factors helped fuel the financial industry’s ascent. Paul Volcker’s monetary policy in the 1980s, and the increased volatility in interest rates that accompanied it, made bond trading much more lucrative. The invention of securitization, interest-rate swaps, and credit-default swaps greatly increased the volume of transactions that bankers could make money on. And an aging and increasingly wealthy population invested more and more money in securities, helped by the invention of the IRA and the 401(k) plan. Together, these developments vastly increased the profit opportunities in financial services.

Click the chart above for a larger view

Not surprisingly, Wall Street ran with these opportunities. From 1973 to 1985, the financial sector never earned more than 16 percent of domestic corporate profits. In 1986, that figure reached 19 percent. In the 1990s, it oscillated between 21 percent and 30 percent, higher than it had ever been in the postwar period. This decade, it reached 41 percent. Pay rose just as dramatically. From 1948 to 1982, average compensation in the financial sector ranged between 99 percent and 108 percent of the average for all domestic private industries. From 1983, it shot upward, reaching 181 percent in 2007.

The great wealth that the financial sector created and concentrated gave bankers enormous political weight—a weight not seen in the U.S. since the era of J.P. Morgan (the man). In that period, the banking panic of 1907 could be stopped only by coordination among private-sector bankers: no government entity was able to offer an effective response. But that first age of banking oligarchs came to an end with the passage of significant banking regulation in response to the Great Depression; the reemergence of an American financial oligarchy is quite recent.

The Wall Street–Washington Corridor

Of course, the U.S. is unique. And just as we have the world’s most advanced economy, military, and technology, we also have its most advanced oligarchy.

In a primitive political system, power is transmitted through violence, or the threat of violence: military coups, private militias, and so on. In a less primitive system more typical of emerging markets, power is transmitted via money: bribes, kickbacks, and offshore bank accounts. Although lobbying and campaign contributions certainly play major roles in the American political system, old-fashioned corruption—envelopes stuffed with $100 bills—is probably a sideshow today, Jack Abramoff notwithstanding.

Instead, the American financial industry gained political power by amassing a kind of cultural capital—a belief system. Once, perhaps, what was good for General Motors was good for the country. Over the past decade, the attitude took hold that what was good for Wall Street was good for the country. The banking-and-securities industry has become one of the top contributors to political campaigns, but at the peak of its influence, it did not have to buy favors the way, for example, the tobacco companies or military contractors might have to. Instead, it benefited from the fact that Washington insiders already believed that large financial institutions and free-flowing capital markets were crucial to America’s position in the world.

One channel of influence was, of course, the flow of individuals between Wall Street and Washington. Robert Rubin, once the co-chairman of Goldman Sachs, served in Washington as Treasury secretary under Clinton, and later became chairman of Citigroup’s executive committee. Henry Paulson, CEO of Goldman Sachs during the long boom, became Treasury secretary under George W.Bush. John Snow, Paulson’s predecessor, left to become chairman of Cerberus Capital Management, a large private-equity firm that also counts Dan Quayle among its executives. Alan Greenspan, after leaving the Federal Reserve, became a consultant to Pimco, perhaps the biggest player in international bond markets.

These personal connections were multiplied many times over at the lower levels of the past three presidential administrations, strengthening the ties between Washington and Wall Street. It has become something of a tradition for Goldman Sachs employees to go into public service after they leave the firm. The flow of Goldman alumni—including Jon Corzine, now the governor of New Jersey, along with Rubin and Paulson—not only placed people with Wall Street’s worldview in the halls of power; it also helped create an image of Goldman (inside the Beltway, at least) as an institution that was itself almost a form of public service.

Wall Street is a very seductive place, imbued with an air of power. Its executives truly believe that they control the levers that make the world go round. A civil servant from Washington invited into their conference rooms, even if just for a meeting, could be forgiven for falling under their sway. Throughout my time at the IMF, I was struck by the easy access of leading financiers to the highest U.S. government officials, and the interweaving of the two career tracks. I vividly remember a meeting in early 2008—attended by top policy makers from a handful of rich countries—at which the chair casually proclaimed, to the room’s general approval, that the best preparation for becoming a central-bank governor was to work first as an investment banker.

A whole generation of policy makers has been mesmerized by Wall Street, always and utterly convinced that whatever the banks said was true. Alan Greenspan’s pronouncements in favor of unregulated financial markets are well known. Yet Greenspan was hardly alone. This is what Ben Bernanke, the man who succeeded him, said in 2006: “The management of market risk and credit risk has become increasingly sophisticated. … Banking organizations of all sizes have made substantial strides over the past two decades in their ability to measure and manage risks.”

Of course, this was mostly an illusion. Regulators, legislators, and academics almost all assumed that the managers of these banks knew what they were doing. In retrospect, they didn’t. AIG’s Financial Products division, for instance, made $2.5 billion in pretax profits in 2005, largely by selling underpriced insurance on complex, poorly understood securities. Often described as “picking up nickels in front of a steamroller,” this strategy is profitable in ordinary years, and catastrophic in bad ones. As of last fall, AIG had outstanding insurance on more than $400 billion in securities. To date, the U.S. government, in an effort to rescue the company, has committed about $180 billion in investments and loans to cover losses that AIG’s sophisticated risk modeling had said were virtually impossible.

Wall Street’s seductive power extended even (or especially) to finance and economics professors, historically confined to the cramped offices of universities and the pursuit of Nobel Prizes. As mathematical finance became more and more essential to practical finance, professors increasingly took positions as consultants or partners at financial institutions. Myron Scholes and Robert Merton, Nobel laureates both, were perhaps the most famous; they took board seats at the hedge fund Long-Term Capital Management in 1994, before the fund famously flamed out at the end of the decade. But many others beat similar paths. This migration gave the stamp of academic legitimacy (and the intimidating aura of intellectual rigor) to the burgeoning world of high finance.

As more and more of the rich made their money in finance, the cult of finance seeped into the culture at large. Works like Barbarians at the Gate, Wall Street, and Bonfire of the Vanities—all intended as cautionary tales—served only to increase Wall Street’s mystique. Michael Lewis noted in Portfolio last year that when he wrote Liar’s Poker, an insider’s account of the financial industry, in 1989, he had hoped the book might provoke outrage at Wall Street’s hubris and excess. Instead, he found himself “knee-deep in letters from students at Ohio State who wanted to know if I had any other secrets to share. … They’d read my book as a how-to manual.” Even Wall Street’s criminals, like Michael Milken and Ivan Boesky, became larger than life. In a society that celebrates the idea of making money, it was easy to infer that the interests of the financial sector were the same as the interests of the country—and that the winners in the financial sector knew better what was good for America than did the career civil servants in Washington. Faith in free financial markets grew into conventional wisdom—trumpeted on the editorial pages of The Wall Street Journal and on the floor of Congress.

From this confluence of campaign finance, personal connections, and ideology there flowed, in just the past decade, a river of deregulatory policies that is, in hindsight, astonishing:

• insistence on free movement of capital across borders;

• the repeal of Depression-era regulations separating commercial and investment banking;

• a congressional ban on the regulation of credit-default swaps;

• major increases in the amount of leverage allowed to investment banks;

• a light (dare I say invisible?) hand at the Securities and Exchange Commission in its regulatory enforcement;

• an international agreement to allow banks to measure their own riskiness;

• and an intentional failure to update regulations so as to keep up with the tremendous pace of financial innovation.

The mood that accompanied these measures in Washington seemed to swing between nonchalance and outright celebration: finance unleashed, it was thought, would continue to propel the economy to greater heights.

there's more here:
The Quiet Coup - Magazine - The Atlantic

this from may 2009.
ain't shit changed.

[aceventura3]

I think a potential profit on the bailout illustrates the absurdity in Obama's claim that it saved us from the brink or a great depression. Whatever the amount, it is such a trivial amount compared to the economy, housing or the financial sector it defies any rational explanation for how it actually saved anything or than a selected few that should have been allowed to fail.

And, the potential profit and the time frame illustrates that the bailout would have and could have been handled by the private sector. When there are assets and enterprise values, investors will step in at the right price to earn a potential profit commiserate with the risk.

[ASU2003]

The issue is that if those certain few failed, then others would fail, and then more would fail, and then investors wouldn't want to risk their money and more would fail, then workers would get let go and stop spending causing more to fail, housing prices would continue to tumble because there is no demand...

Originally Posted by Derwood

Actually, Baraka, if you read Matt Taibbi's series of articles about Wall Street post-TARP, you will see that they continue to do exactly what they did before, and plan to continue to do it. They now have DC in their back pocket, with former Wall Street insiders in most major economic positions in Washington. The TARP bailout was a major victory for Wall Street, and they will continue to exploit everyone/everything they can as Congress bends over backwards to make sure that they are never punished and that no regulations are put in place to stop them

And who are we going to vote for that would put some laws on the books and punish Wall Street? The Tea Party should be a far left wing party if they really want to fix this country.

[Derwood]

Originally Posted by ASU2003

And who are we going to vote for that would put some laws on the books and punish Wall Street? The Tea Party should be a far left wing party if they really want to fix this country.

No one, because it's all one party. The party of the rich.

[boink]

the Goldman Sachs party
The Great American Bubble Machine | Rolling Stone Politics

[Tully Mars]

Originally Posted by Derwood

No one, because it's all one party. The party of the rich.

That's about it in a nutshell.

---------- Post added at 04:24 PM ---------- Previous post was at 04:19 PM ----------

Originally Posted by boink

the Goldman Sachs party
The Great American Bubble Machine | Rolling Stone Politics

That writer uses terms like "shitloads" and "bullshit" pay no attention to him.

[boink]

he also says "fuck"...can you point me to a better article ? I've listened to the "bad bank" and "the giant pool of money" on This American Life...much more technical language might be over my head.

I mean, is this guy wrong ? or his use of crude terminology takes him out of relevance somehow ?

[Baraka_Guru]

Just substitute:

shitload: "myriad"
bullshit: "nonsense"
fuck: "I do say, sir, that I have utter contempt!"

Now read the ideas and don't get so caught up on words.

[boink]

heh, I'm not, but I was thinking of printing it for my mom, who's 85 or so and dosn't have the internet.

[The_Jazz]

Read

The Big Short by Michael Lewis.

The Big Short by Michael Lewis.

He also wrote The Blind Side and Liars Poker and Moneyball. When there's swearing, it's a direct quote of someone interviewed for the book.

This one's not so much about the guys that caused the fall (and thought they were so smart that they ended up buying their own shitty products) than the guys that realized what was going on and figured out how to make money off the inevitable crash.

[Derwood]

Taibbi always swears....it's just his style. The facts are all in there, though, so don't let the choice of adjectives distract you from his main points

[Baraka_Guru]

Well, you know things are in the crapper when you get the Chairman of the Federal Reserve still talking about instituting quantitative easing (QE) (i.e. "printing money" to buy bonds to ease pressure on banks). When rates are bottomed out and things still aren't on the mend, this is more or less a last ditch effort to kick-start the economy.

It is, of course, not without its risks. The biggest, namely, is inflation.

If you paid attention, you will have noticed that stocks have had their best September since the Great Depression—and this despite a rocky economy—in addition to gold being at its highest value ever. It is hoped that the QE will push both stock and gold with the benefit being that profits will be made (i.e. taken) and reinvested elsewhere thus bolstering the overall economy.

However, the risk is that they're printing money—expanding the money supply. This could put further downward pressure on the American dollar. More money supply = lower unit value. Plus, it could cause people to sell off their U.S. currency holdings further reducing its value. The net effect? Inflation. The worst-case scenario? Hyperinflation. The dollar has already lost value based on Bernanke's speculations.

The stock market seems to like it, though. Someone's making money.

[dksuddeth]

can anyone point out to me where it gives the federal government the power to act like a corporation and make profits off the involuntary investments of the tax payers?

[roachboy]

i don't think the founders wrote anything about systemic collapse in the context of global capital flows into the constitution.
i don't think the founders wrote anything about capitalism at all into the constitution.
i don't think capitalism in the united states had really taken shape in 1789.
maybe we shouldn't allow capitalism.

[Baraka_Guru]

It might be easier to find where it says the federal government doesn't have said power.

And, roachboy, the United States Constitution was written during the economic pipe dream of mercantilism, right?

Where do we go from here?

[roachboy]

there's lots of alternatives that go well past the reactive, ill-considered actions of the bush people, who remain the gift that keeps on giving.


and if the idea is to remain within the degenerate capitalist system because there's no other-than-fascist alternative at this particular historical juncture because there's no basis to think one......i think it's well past time to shove the right out of the way and do something with clearly stated objectives of expanding activity, refiguring the geography of production and putting people back to work with an overall objective of creating a more stable, equitable form of life.

for example, in the shorter run revamping infrastructures and rethinking the transportation model seems self-evident as an important undertaking. beyond it lay the rethinking petrocapitalism....

Failing U.S. transportation system will imperil prosperity, report finds

By Ashley Halsey III
Washington Post Staff Writer
Monday, October 4, 2010; 6:20 PM

The United States is saddled with a rapidly decaying and woefully underfunded transportation system that will undermine its status in the global economy unless Congress and the public embrace innovative reforms, a bipartisan panel of experts concludes in a report released Monday.

U.S. investment in preservation and development of transportation infrastructure lags so far behind that of China, Russia and European nations that it will lead to "a steady erosion of the social and economic foundations for American prosperity in the long run."

That is a central conclusion in a report issued on behalf of about 80 transportation experts who met for three days in September 2009 at the University of Virginia. Few of their conclusions were groundbreaking, but the weight of their credentials lends gravity to their findings.

Co-chaired by two former secretaries of transportation - Norman Y. Mineta and Samuel K. Skinner - the group estimated that an additional $134 billion to $262 billion must be spent per year through 2035 to rebuild and improve roads, rail systems and air transportation.

"We're going to have bridges collapse. We're going to have earthquakes. We need somebody to grab the issue and run with it, whether it be in Congress or the White House," Mineta said Monday during a news conference at the Rayburn House Office Building.

The key to salvation is developing new long-term funding sources to replace the waning revenue from federal and state gas taxes that largely paid for the construction and expansion of the highway system in the 1950s and 1960s, the report said.

"Infrastructure is important, but it's not getting the face time with the American people," Skinner said. "We've got to look at this as an investment, not an expense."

A major increase in the federal gas tax, which has remained unchanged since it was bumped to 18.4 cents per gallon in 1993, might be the most politically palatable way to boost revenue in the short term, the report said, but over the long run, Americans should expect to pay for each mile they drive.

"A fee of just one penny per mile would equal the revenue currently collected by the fuel tax; a fee of two cents per mile would generate the revenue necessary to support an appropriate level of investment over the long term," the report said.

Fuel tax revenue, including state taxes that range from 8 cents in Alaska to 46.6 cents in California, have declined as fuel efficiency has increased. President Obama mandated that new cars get 35.5 miles on average per gallon by 2016, and government officials said last week that they are considering raising the average to 62 miles per gallon by 2025.

Facing midterm elections in November, Congress has lacked the will to tackle transportation funding. Efforts to advance a new six-year federal transportation plan stalled on Capitol Hill after the previous one expired last year.

If Congress were to do the report's bidding, the task would be far broader in scope than simply coming up with trillions of dollars in long-term funding to rebuild a 50-year-old highway system.

The experts also advocated the adoption of a distinct capital spending plan for transportation, empowering state and local governments with authority to make choices now dictated from the federal level, continued development of high-speed rail systems better integrated with freight rail transportation, and expansion of intermodal policies rather than reliance on highways alone to move goods and people.

But Mineta noted that 42 days after an eight-lane bridge collapsed into the Mississippi River in Minneapolis in 2007, a survey found that 53 percent of respondents opposed an emergency gas tax increase to pay for infrastructure repairs.

"The shelf life of a tragedy like [I-35W] was 42 days," he said. Thirteen people died in the collapse and more than 100 were injured.

The report emphasized that federal policy should be crafted to address congestion by providing incentives that encourage land use that reduces single-occupant commutes and promotes "liveable communities."

"Creating communities conducive to walking and alternate modes of transportation . . . should be an important goal of transportation policy at all levels of government," the report said.

It also encouraged expansion of innovative public-private partnerships to further transportation goals, citing the high-occupancy toll lane project in Northern Virginia as an example.

"The one option that's not in this report is throwing up our hands," said Jeff Shane, a former Transportation Department official and a member of the panel. "That seems to be the option that Congress chooses."

washingtonpost.com

this takes you to the report:

Beyond Stimulus: Toward a New Transportation Agenda for America - Miller Center of Public Affairs


there are models aplenty for an industrial policy and some form of industrial policy seems the only hope of a way out of the present economic morass:

UNU-WIDER : Japan?s Model of Economic Development: Relevant and Nonrelevant Elements for Developing Economies

for example.

[dogzilla]

Originally Posted by Baraka_Guru

Well, you know things are in the crapper when you get the Chairman of the Federal Reserve still talking about instituting quantitative easing (QE) (i.e. "printing money" to buy bonds to ease pressure on banks). When rates are bottomed out and things still aren't on the mend, this is more or less a last ditch effort to kick-start the economy.

Yet another story about how Obama's giveaways haven't fixed much of anything.

Hasn't it yet occurred to these guys that since people have discovered that maxing out your credit card or your home equity is a stupid idea, that the economy has shrunk and is going to stay that way for a while? Obama trying to inflate the economy turned out to be a failure.

[Derwood]

and the reason people have maxed out their credit cards and home equity is because wages have been stagnant/dropped vs. inflation, which means there is less buying power, thus less demand, thus a recession

[Baraka_Guru]

Originally Posted by dogzilla

Yet another story about how Obama's giveaways haven't fixed much of anything.

The idea is that it hasn't done enough—not enough was done. On the other hand, it likely prevented a deeper catastrophe. I won't go so far as to say Keynesian spending hasn't done anything at all.

Hasn't it yet occurred to these guys that since people have discovered that maxing out your credit card or your home equity is a stupid idea, that the economy has shrunk and is going to stay that way for a while? Obama trying to inflate the economy turned out to be a failure.

I read an article today that reported how Americans are seeing a reduction of personal debt. Much of this is via defaults, meaning banks are writing off millions. But this means that future growth is expected. I only hope this is achieved through prudent financial practices. I sincerely hope the average American has sobered up on the idea of using too much credit and spending home equity. If this is the case, the recovery will be modest, which is to be expected anyway.

Originally Posted by Derwood

and the reason people have maxed out their credit cards and home equity is because wages have been stagnant/dropped vs. inflation, which means there is less buying power, thus less demand, thus a recession

While this isn't likely universally so, it is generally so I bet. It's becoming more of a middle-class thing to do this too. It's not just the low-income earners trying to get by with too little income. Many households, even those earning six-figure incomes, are racking up debts and over extending themselves. They are reaching to lifestyles that their incomes can't cover.

This is a problem of indulgence and trying to live to some lofty standard of American Life—the good ol' American Way of Life. It's ridiculous. Americans—in general—are going to have to start leading different lifestyles, and this will remake the American economy. There is a shift coming, and whether it's modestly positive or disastrously negative will depend on whether the average American can live modestly. They need to return to the idea of actually saving some of what you earn instead of spending more than you earn. People in every wealth class is guilty of this.

[dogzilla]

Originally Posted by Derwood

and the reason people have maxed out their credit cards and home equity is because wages have been stagnant/dropped vs. inflation, which means there is less buying power, thus less demand, thus a recession

That's pretty poor money management to run up your credit balance to buy toys instead of waiting until you have the cash on hand to pay for them.

If you pay cash, you're effectively paying less for whatever you're buying and you keep those evil banks from making as much profit.

---------- Post added at 05:59 PM ---------- Previous post was at 05:53 PM ----------

Originally Posted by Baraka_Guru

The idea is that it hasn't done enough—not enough was done. On the other hand, it likely prevented a deeper catastrophe. I won't go so far as to say Keynesian spending hasn't done anything at all.

So how much should have been spent on Obama's giveaways? $5 trillion? $10 trillion? Just how much of a kick in the ass does the taxpayer have to take by way of increased inflation or higher taxes to pay off Obama's debt to satisfy Obama's fantasy of stimulating the economy.

That's the problem with this stimulus nonsense. First you spend $1 trillion and it doesn't work. Then people start clamoring for even more spending because the first try didn't work. Then even more because the second attempt didn't work. Pretty soon you have pretty serious money thrown down a rathole and no ability to ever recover from it short of national bankruptcy.

[dksuddeth]

Originally Posted by roachboy

i don't think the founders wrote anything about systemic collapse in the context of global capital flows into the constitution.

considering that the founders were all about 'the people' maintaining a firm hold on all of their earned wealth and property, most logical people could rightfully assume that capitalism was at the root of the constitution.

Originally Posted by roachboy

i don't think the founders wrote anything about capitalism at all into the constitution.

see the above.

Originally Posted by roachboy

i don't think capitalism in the united states had really taken shape in 1789.

capitalism was it's purest form in 1789. It was only when that government started controlling the economy did capitalism start to fail

Originally Posted by roachboy

maybe we shouldn't allow capitalism.

pray tell, what should we allow?

[Baraka_Guru]

Originally Posted by dogzilla

So how much should have been spent on Obama's giveaways? $5 trillion? $10 trillion? Just how much of a kick in the ass does the taxpayer have to take by way of increased inflation or higher taxes to pay off Obama's debt to satisfy Obama's fantasy of stimulating the economy.

I can't answer that question, the question of a fixed sum of money. And it's the taxpayer who's been kicking themselves in the asses this whole time. The government didn't cause the economic crisis. It could be argued that a lack of government allowed it to happen. But I don't have much else to say about this because you seem to think that spending doesn't stimulate economies.

That's the problem with this stimulus nonsense. First you spend $1 trillion and it doesn't work. Then people start clamoring for even more spending because the first try didn't work. Then even more because the second attempt didn't work. Pretty soon you have pretty serious money thrown down a rathole and no ability to ever recover from it short of national bankruptcy.

Most stimulus spending takes a while to work its way through. In addition, the net effect could be more about lessening of the steep dips of downturns in the business cycle than being responsible for a recovery. I think the stimulus is more about getting the ball rolling, not "fixing things," especially considering stimulus spending is a temporary measure.

Originally Posted by dksuddeth

capitalism was it's purest form in 1789. It was only when that government started controlling the economy did capitalism start to fail

This is funny, for a couple of reasons:

1. You say that American capitalism started to fail even before the vast majority of the capitalist-driven economic expansion---more than the world has ever seen.
2. You seem to think that American capitalism was negatively affected by the government controlling the economy, and yet you failed to mention anything about the people. It's people who are responsible for corruption under capitalism, not the government. The government and the people who influenced it should be praised for developing the American economy into something more bearable than the disaster-waiting-to-happen under lassez-faire.

[ASU2003]

Originally Posted by dksuddeth

can anyone point out to me where it gives the federal government the power to act like a corporation and make profits off the involuntary investments of the tax payers?

Maybe we wouldn't be in the financial mess that we are in if that was the case.

If instead of having to sell public buildings, they could rent them out. Instead of selling drug patents the NIH and public universities come up with to private drug companies. Maybe allow NASA to take a space tourist or two into orbit. How about joy rides in military planes for people willing to pay. Or maybe some people would like to go to a weekend boot camp just for the experience. There are a lot of things the government could be making a lot of money on, and a lot of things that just sit unused that taxpayers have paid for and could be earning money.

[dksuddeth]

Originally Posted by Baraka_Guru

This is funny, for a couple of reasons:

1. You say that American capitalism started to fail even before the vast majority of the capitalist-driven economic expansion---more than the world has ever seen.

1. That 'economic expansion was able to happen because of two reasons...
   1)corporatism had already influenced government enough to provide them every advantage..
   and
   2) it hadn't been quite long enough for the feds to have really serious power to control the lives of individuals.
   
   

   Originally Posted by Baraka_Guru

   You seem to think that American capitalism was negatively affected by the government controlling the economy, and yet you failed to mention anything about the people. It's people who are responsible for corruption under capitalism, not the government. The government and the people who influenced it should be praised for developing the American economy into something more bearable than the disaster-waiting-to-happen under lassez-faire.

total appeal to insanity.

can people be corrupt? of course, but like most totalitarians, you are unable to accept the premise that law breakers should be punished, so you push for any and every regulation possible to hopefully prevent criminal action. so far you have totally and completely failed as is being shown by the last 30 years of government growth and political cronyism.

---------- Post added at 07:10 PM ---------- Previous post was at 07:09 PM ----------

Originally Posted by ASU2003

Maybe we wouldn't be in the financial mess that we are in if that was the case.

If instead of having to sell public buildings, they could rent them out. Instead of selling drug patents the NIH and public universities come up with to private drug companies. Maybe allow NASA to take a space tourist or two into orbit. How about joy rides in military planes for people willing to pay. Or maybe some people would like to go to a weekend boot camp just for the experience. There are a lot of things the government could be making a lot of money on, and a lot of things that just sit unused that taxpayers have paid for and could be earning money.

I guess we can now add you to the list of people that didn't learn from history.

[Baraka_Guru]

Originally Posted by dksuddeth

That 'economic expansion was able to happen because of two reasons...
1)corporatism had already influenced government enough to provide them every advantage..
and
2) it hadn't been quite long enough for the feds to have really serious power to control the lives of individuals.

So wait, the rise of unions, labour rights, and consumer protections was giving corporations every advantage? Was this controlling the lives of individuals? Because, you know, corporations weren't at all controlling....like ever.

total appeal to insanity.

can people be corrupt? of course, but like most totalitarians, you are unable to accept the premise that law breakers should be punished, so you push for any and every regulation possible to hopefully prevent criminal action. so far you have totally and completely failed as is being shown by the last 30 years of government growth and political cronyism.

Wait, did you just call me a totalitarian? If I'm a totalitarian, then you're an anarchist. That doesn't make a lot of sense, does it? Or are you an anarchist? If so, then my comparison doesn't work.

Um, anyway, I'm not quite sure what you're getting at, because I do indeed accept the premise that law breakers should be punished. However, I also believe that reasonable regulation works well to prevent corruption and immoral behaviours. [I don't think "reasonable regulation" is a term that would appear on the radar of the totalitarian mindset.]

As for the last 30 years of government growth and cronyism, I think you're referring to the U.S. more so that Canada. Regardless, I'm again not sure what you're getting at. Are you saying that the American totalitarian regime has failed to buckle down on anarcho-capitalism and now the government is too big and full of cronies?



Someone has fallen into the common trap of thinking along the lines of binary opposition.... if it's not "pure unadulterated freedom," it must be totalitarianism. Of course, it's more apt to say if it's not anarchy, it must be totalitarianism.

I don't think anarchy would be a suitable salve for American society, and I think totalitarianism is virtually impossible. Call me an idealist. I don't mind that label.

[dksuddeth]

k, baraka, i feel a little stupid now because i was writing under the premise you're in England. I forgot you're in Canada. my bad.

[Baraka_Guru]

Woah, okay. I thought something was off.... it was confusing.

[roachboy]

so either you don't know what capitalism is, dk or the special language that libertarians use to talk about things is so confusing that it creates the impression that you don't.

"corporatism" is what most of the world refers to capitalism since, say, 1870, so since the development of publicly offered stock. or maybe since the 1880s and affirmation of the corporate person. it's definitely a us-centered pseudo-history.

corporations and the state are intertwined. big scary and out of control i assume.

so before that, there was this other thing, which is apparently capitalism?

but if the distinction above holds, then capitalism isn't steel production, say. because that's "corporatism"?

what's even more confusing is that corporatism has a meaning already. it refers to organic theories of the division of labor modelled more or less on a nostalgia saturated image of the guild system. it was dear to italian catholic fascists in the 1920s-1930s. it's pretty well known, that meaning. whence the static the insistence on libertarian private language generates.

capitalism, then. how do you define it? separation of ownership from production? standardization of production processes? tendency to exploit economies of scale? alienation? wage labor?

or is it just the reverse of "corporatism" (bad)? so a synonym for "good"?

[dksuddeth]

Originally Posted by roachboy

so either you don't know what capitalism is, dk or the special language that libertarians use to talk about things is so confusing that it creates the impression that you don't.

"corporatism" is what most of the world refers to capitalism since, say, 1870, so since the development of publicly offered stock. or maybe since the 1880s and affirmation of the corporate person. it's definitely a us-centered pseudo-history.

I would actually state the claim that you don't know what capitalism is, that or your insane hatred of it is clouding your judgement of it. Or you could be trying to use your pseudo-intellectual professor mumbo jumbo talk to confuse the terms on purpose.

Originally Posted by roachboy

corporations and the state are intertwined. big scary and out of control i assume.

isn't that fascism?

Originally Posted by roachboy

so before that, there was this other thing, which is apparently capitalism?

but if the distinction above holds, then capitalism isn't steel production, say. because that's "corporatism"?

what's even more confusing is that corporatism has a meaning already. it refers to organic theories of the division of labor modelled more or less on a nostalgia saturated image of the guild system. it was dear to italian catholic fascists in the 1920s-1930s. it's pretty well known, that meaning. whence the static the insistence on libertarian private language generates.

capitalism, then. how do you define it? separation of ownership from production? standardization of production processes? tendency to exploit economies of scale? alienation? wage labor?

or is it just the reverse of "corporatism" (bad)? so a synonym for "good"?

more attempts to obfuscate and confuse the terms. I refuse to play the game you're setting up. you know what capitalism is, you know what corporatism is, and you know what fascism and totalitarianism is. accept it or continue to use deception to further your socialism, it's up to you. most people can easily ignore your tripe.

[roachboy]

uh dk...capitalism is typically defined around actual feature.
but here, i'll make it easy for you to find some of them:

separation of ownership from production
generalization of wage relations (the selling of labor power for a wage)
standardization of production processes/standardization of products.
tendency to exploit economies of scale
deskilling of work



in 1789, the only sectors that were in any sense "capitalist" were textiles and that primarily in england. the **mass production** of cloth is an initial capitalist venture. mass produced fabrics. early capitalism was primarily about selling cheap shit to the poor.


by 1830, when tocqueville traveled around the states gathering the material he later used for "democracy in america" he was well aware that most of the united states was **not** capitalist. capitalism at the time was--and remained until after world war 2--primarily an urban phenomenon. for tocqueville, the coming of capitalism, the spread in influence of the cities and the modes of social organization particular to them (in significant measure because they were remodeled in the image of capitalist relations of production) spelled a mortal threat to the american democratic experiment. and he was, i think, correct.

in the late 18th century, apart from textile production, capitalism existed in the late 18th century almost entirely in the imaginings of writers of texts on political economy. and there it was largely an intellectual collage.

there were lots of features/emergent aspects of social organization that came to be associated with capitalism that were floating about in fragments doing their things---for example the physiocrat-inspired "markety" ideology of turgot that inspired the temporary abolition of the guild system in france in the 1760s and again in 1791 with the le chapelier law---which is, anachronistically, "about" creating a more capitalist-friendly work-force by breaking the power of working people to control the production contexts in which they operate by breaking the organizations that enabled it. but that doesn't mean that france "was" suddenly capitalist one fine day in 1791.



you go on and on about capitalism in some 18th century "pure" form when even a rudimentary understanding of what capitalism as a mode of organization of production would tell you didn't fucking exist.

but maybe that **is** the most functional type of capitalism, the one that doesn't exist materially.


on corporatism: you don't know what the term means. i tell you what it means and you get all snippy. reality is difficult.

on fascism: you don't know what that word means either. fascism is a variant of militarized nationalism. it relies on essentializing images of the community and its Others and uses the figure of the Other (typically its exclusion) to solidify a sense of identity. it relies on a mass media apparatus that provides an illusory simultaneity of experience and synchronizes mass identifications with the person of the Leader. not necessarily the state as such...in fact typically not the state as such...the person of the Decider. fascism operates from a state of emergency.



and don't waste time with cheap red-baiting, dk.

[Baraka_Guru]

I think the mythology built up around capitalism post-Rand is centred around the idea that "capitalism is good" because "capitalism means freedom," and "America is a capitalist nation." So it stands for many that more capitalism means more good because it means more freedom, and who doesn't want to be free?

The problem with that mindset is that it distracts from the core problem of today's economic situation: capitalism is also corrupt. So when the wholesale failure of capitalists to mitigate their own risks causes the global system to spin out of control, it's suddenly the fault of something else. Because it can't be the fault of capitalism, because it's an ideal. It's freedom, and freedom is good. Anything else is an assault on liberty and risks turning into authoritarianism or, worse, totalitarianism. As though for some reason there is no middle ground between totalitarian communism and oligarchical lassez-faire. Middle grounds are for progressives, and we all know what they want, right?

So the blame shifts away from the First Movers: the holders and controllers of capital, and it shifts towards the end users or "clients" or "customers," if you will. Except they're not quite that, exactly. In this case, specifically with the sub-prime disaster, they weren't so much clients as they were profit centres that went awry. So when the profit centres fail, the shift easily falls on what's left: the people left holding the bag (which happens to have bottomed out, and which happens to be their homes) and the people who act to do something to prevent the whole system from failing entirely. So why not blame people who took these mortgages and government that tried to keep the wider system going? Surely it's their fault for messing things up. And the blame that still rests on the troubled banks who issued these products—and whether they were bailed, will be bailed; will survive, will fail—is inconsequential; once the dust settles, it will be business as usual.

Capital and its holders and users, on the other hand, are what makes things possible, they move things forward, they keep the nation free. Who cares how they go about it, so long as the money keeps flowing. So why not just keep out of their way? Things would be so much better if that were the case, would they not?