Jesus ****ing Christ. We witnessed the biggest theft in human history. I'm gonna say it again and again - bring on the ******* class war.
I'm not sure you're understanding what happened here. There's no question the Fed backstopped all sorts of stuff worth trillions upon trillions. But doing that costs no money. The argument was pretty simple. Either TARP would work or it wouldn't. If it did, the backstop costs nothing because the banks survive (this is what happened). If it didn't, the entire western financial system was going down anyway, so the backstops didn't really matter - money wasn't going to be worth anything anyway. Some of the other quotes are nonsense and suggest that these commenters don't really have an idea of what they are talking about: ...the Fed gave $13 billion to Goldman Sachs through AIG, a direct transfer of $80 from every working American to the employees of Goldman Sachs. AIG is paying back all the money they got, so again, cost will be zero. TARP failed. Its losses are so low because the Fed stood behind the banks, allowing them to play one arm of the government against the other. This is bizarre. TARP worked and did *exactly* what it was intended, but because we don't like *how* it worked, we'll just say it failed. What? This all strikes me as a bunch of people not understanding the purpose or strategy behind TARP and the various Fed actions, assigning their own views to it, and then being outraged that it didn't conform to their own views.
Major is right. The taxpayers have lost nothing. I've laid out the Con of the Decade (Part I) in outline form: 1. Enable trillions of dollars in mortgages guaranteed to default by packaging unlimited quantities of them into mortgage-backed securities (MBS), creating umlimited demand for fraudulently originated loans. 2. Sell these MBS as "safe" to credulous investors, institutions, town councils in Norway, etc., i.e. "the bezzle" on a global scale. 3. Make huge "side bets" against these doomed mortgages so when they default then the short-side bets generate billions in profits. 4. Leverage each $1 of actual capital into $100 of high-risk bets. 5. Hide the utterly fraudulent bets offshore and/or off-balance sheet (not that the regulators you had muzzled would have noticed anyway). 6. When the longside bets go bad, transfer hundreds of billions of dollars in Federal guarantees, bailouts and backstops into the private hands which made the risky bets, either via direct payments or via proxies like AIG. Enable these private Power Elites to borrow hundreds of billions more from the Treasury/Fed at zero interest. 7. Deposit these funds at the Federal Reserve, where they earn 3-4%. Reap billions in guaranteed income by borrowing Federal money for free and getting paid interest by the Fed. 8. As profits pile up, start buying boatloads of short-term U.S. Treasuries. Now the taxpayers who absorbed the trillions in private losses and who transferred trillions in subsidies, backstops, guarantees, bailouts and loans to private banks and corporations, are now paying interest on the Treasuries their own money purchased for the banks/corporations. 9. Slowly acquire trillions of dollars in Treasuries--not difficult to do as the Federal government is borrowing $1.5 trillion a year. 10. Stop buying Treasuries and dump a boatload onto the market, forcing interest rates to rise as supply of new T-Bills exceeds demand (at least temporarily). Repeat as necessary to double and then triple interest rates paid on Treasuries. 11. Buy hundreds of billions in long-term Treasuries at high rates of interest. As interest rates rise, interest payments dwarf all other Federal spending, forcing extreme cuts in all other government spending. 12. Enjoy the hundreds of billions of dollars in interest payments being paid by taxpayers on Treasuries that were purchased with their money but which are safely in private hands. Since the Federal government could potentially inflate away these trillions in Treasuries, buy enough elected officials to force austerity so inflation remains tame. In essence, these private banks and corporations now own the revenue stream of the Federal government and its taxpayers. Neat con, and the marks will never understand how "saving our financial system" led to their servitude to the very interests they bailed out. The circle is now complete: in "saving our financial system," the public borrowed trillions and transferred the money to private Power Elites, who then buy the public debt with the money swindled out of the taxpayer. Then the taxpayers transfer more wealth every year to the Power Elites/Plutocracy in the form of interest on the Treasury debt. The Power Elites will own the debt that was taken on to bail them out of bad private bets: this is the culmination of privatized gains, socialized risk. In effect, it's a Third World/colonial scam on a gigantic scale: plunder the public treasury, then buy the debt which was borrowed and transferred to your pockets. You are buying the country with money you borrowed from its taxpayers. No despot could do it better. -Charles Hugh Smith
How can you unequivocally say the Fed bailout costs no money when there are still trillions outstanding? How can you unequivocally say the Fed bailout costs no money when nobody can give a solid number for how much money went out the door? CNN has it at $9.9 trillion (http://money.cnn.com/2010/12/01/news/economy/fed_reserve_data_release/index.htm). Others at $4-6 trillion (http://www.sourcewatch.org/index.php?title=Total_Wall_Street_Bailout_Cost). Bloomberg says $3.3 trillion (http://www.sfgate.com/cgi-bin/artic...CR92407SXKX01-36BGSR1US5C8RSRGAFRJ6HO0II.DTL). The reports can't even agree on the interest rates that were charged. And really, you think all that was repaid? The national debt is over $12 trillion and you're telling me that in two years, a bunch of banks that were on their last legs paid back the equivalent of 25% (to use Bloomberg's number) of our national debt and still had enough left over to give out record bonuses? There's enough money on Wall Street to pay off our national debt in 8 years and still allow the bankers to make obscene amounts of money? Please. If we're talking the CNN number of $9.9 trillion, that is the equivalent of the outstanding balance on all mortgages in the country. Yet it was all paid back. I'm not a conspiracy kind of guy, but seriously, who's being naive Major? Oh, and just so we're clear... we're talking about more than bank loans. The Fed also purchased over $1 trillion of mortgage-backed securities. How's the return on those looking? And hardly anything involving this mess is simple. To suggest it is shows the weakness of your argument. Here's an article about a Socialist (Socialist and Marxists sometimes understand capitalism better than capitalists... especially apologists for the Masters of the Universe)...
Simple- Dear Titanic, nothing can sink you, keep borrowing straight ahead. There is no news here. Just keep an eye on the debt and the price of groceries.
Major can say these things because he believes them to be true and because he does not like to admit how the US corporate culture has turned the country into a weird fascist oligarchy.
Um, if the banks failed, the dollar would still have value. Basically, the banks committed mass fraud and were given money by the Fed and the gov't to bail them out of their risky, horrible decisions. These banks care nothing about average Americans...and with all of this bailout money, why aren't they lending? Also, these banks are NOT healthy now. Our solution? Let's change the accounting standards so that it will APPEAR that they are healthy, when in actuality they are still a total mess. Good old shady accounting.
Sorry - to clarify, if the system doesn't collapse, it costs no money. If the system does ultimately collapse, it will be costly and also pretty much irrelevant. Again - you're not understanding what happened here. A backstop is NOT the same as giving out money. But even your link says the loans referred to got paid back. From your link: The Federal Reserve made $9 trillion in overnight loans to major banks and Wall Street firms during the financial crisis, according to newly revealed data released Wednesday. The loans were made through a special loan program set up by the Fed in the wake of the Bear Stearns collapse in March 2008 to keep the nation's bond markets The amount of cash being pumped out to the financial giants was not previously disclosed. All the loans were backed by collateral and all were paid back with a very low interest rate to the Fed -- an annual rate of between 0.5% to 3.5%. You're not being naive - you're just not understanding what the Fed actually did. That's not a criticism of you - most people don't understand it. The problem is when people start criticizing the Fed based on that misunderstanding. Actually, I can say them because I actually follow what happened instead of making blanket statements that are not based in fact. You make these snide comments all the time, but you have yet to actually use any analysis to back your position. It's no different than tea partiers and their nonsense rhetoric with health care or any number of other topics. You start with a silly position and then when you learn that you were actually wrong in your claim, you just shift the argument and make the same silly claims in a different context. It contributes nothing to an actual discussion.
Yes, the dollar would have value. Not much, but it would have value. But the western hemisphere would also be in the stone age again, so it's still pretty much irrelevant. Second, as far as lending - you're arguing in circles. You're upset that banks made a bunch of risky, stupid decisions (as you should be), but then you're also upset that they are being more careful to not make stupid decisions now. Lending standards have been tightened - that's what we want! You can't have it both ways. We got into this problem with banks securitizing loans and then making more loans. We don't want that - the reality is that we should have never been giving out that many loans in good times. In bad times, even less people should be qualifying. So we shouldn't and won't be getting to back to giving out loans like we were before. If people want loans, they have to get their balance sheets in order. That's what is in the process of happening. People with good quality credit have relatively few problems getting loans right now. The issue is that because of a massive recession, lots of people don't have good credit. The simple answer to your question is that it takes time to fix that and so it will take time to start giving out loans again. Actually, the banks are pretty healthy right now. The real risk to the banks - and why they nearly failed - was entirely a paper problem. They were never in danger of being unable to pay their bills as you normally think of with a bankrupt company. They were in trouble due to those paper accounting standards, which many people realized simply didn't make sense. If I have a performing loan that has an income stream, it makes no sense to value it at whatever price I'd have to sell it for today, when I don't actually have to sell it today. It caused all sorts of distortions when people stopped buying all that stuff out of a fear panic.
In some respects regarding this topic I think you are accurate here. That being said, my position was almost always centered on regulation to protect the taxpayer, not the mechanics of the bailout. The snide attitude is centered around the differences in how we process actions relative to our principles. However, you are correct that it is not helpful and I apologize. This is simply not true, but it's worthwhile of me to take note of it to assure it does not occur.
Actually they are not close to healthy right now. In brief, banks are benefiting from close to zero borrowing costs and fewer competitors; they are benefiting from a massive transfer of wealth from savers to borrowers given a dozen different government bailout and subsidy programs for the financial system; they are not properly provisioning/reserving for massive future loan losses; they are not properly marking down current losses from loans in delinquency; they are using the recent mark-to-market accounting changes by FASB to inflate the value of many assets; they are using a number of accounting tricks to minimize reported losses and maximize reported earnings; the Treasury is using a stress scenario for the stress tests that is not a true stress scenario as actual data are already running worse than the worst case scenario.
And another of my links says there are trillions still outstanding. I understand that the Fed gave banks cheap money that they made a quick profit on and then repaid at least some of those loans while pocketing the profits and not putting it back in the economy. I understand that banks could repay TARP with one hand while they were taking cheap Fed money with the other. I admittedly don't know much about high finance, but I do know we lost a lot of paper wealth over the last two years thanks to fraud and greed and sometime the carousel is going to stop and somebody's going to have to eat those losses. Right now, it's being crammed down to the average American, but that, like the schemes that got us into this mess, is unsustainable.
its not that difficult, the guarantees are worth trillions, but that is not money spent. I guarantee every mortgage on my block, 10 houses, $2MM. I haven't spent any money, and if none fail, I won't spend any money.
I think the confusion about the $ trillions comes from the terms of the loans. Most of these are extremely short term, like daily-> so if you do 5-10 $50bb overnight loans to the same bank over a few weeks, you start to get up towards "trillions" without ever really having that much outstanding.
Fair enough - this is an issue that annoys me because I think a lot of people like to complain without really understanding what they are complaining about. That may not apply to you, though - I've lost track of who all I've discussed this issue with. FWIW, at the end of the day - and who knows when that day will come with all the outstanding mechanisms out there - I don't think the taxpayer is going to lose a single dime on all the bailout stuff combined. The backstops will go away, the TARP stuff will be repaid w/ interest. The trillions borrowed by banks all gets paid back with interest; it was stuff the Fed already owned in treasury securities, so it had no cost to the Fed to lend it out. Fair enough - I think I may have gotten you confused with others. My statement was based on arguing with people a while back who said we'd never get money back from TARP; then when that turned out to not be true, stating that we'd never get paid by BoAmerica, Citibank, etc. Then when those got paid back, making the same claim about AIG; and on and on. It frustrates me when those people keep making more claims - not backed up by anything - after being wrong over and over. But I'm pretty sure that wasn't you, so my statement was badly targeted. Sorry about that. (I also made a similar statement in an Obama thread on the same premise, so apologies for that as well).
