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Danger, Elizabeth Warren!

Here’s how Elizabeth Warren started her Senate career yesterday:

Now, I think these are good questions and she elicited some very uncomfortable responses.  Any of us could have asked those questions because we want to know.  Why are only ordinary people prosecuted and persecuted with the government playing the role of Javert ruining people’s lives for what may be minor infractions, like drug abuse or petty theft, while the bankers get away with murder?

The problem is I think her own party is setting her up.  That’s not to say she shouldn’t be doing what she’s doing.  This is the kind of stuff we, the average citizens, like to see.  But because she is so prominent, right out of the gate, and such a threat to the right wing AND to the Democrats’ campaign warchests, she’s going to be put out there with enough rope to hang herself.

It’s hard for me to see exactly what angle Rush Limbaugh and the Glenn Beck types are going to use to neutralize her because there’s really nothing wrong with her line of questioning.  But I guarantee that she will become the next target of ridicule and misogyny before very long.  Both parties’ leadership want her out of the way.  They’ll do a Franken on her.

I hope she’s ready and that there are enough of us out here to push back the tide of nastiness headed her way.

Or at least that Paul Krugman can spare some time from his exhausting job tilting at windmills to put in a good word for her.

By the way, if banks are too big to fail or prosecute then the answer to our problems seems to be pretty simple- break them up first.  Voile!  We could prosecute them to our heart’s content.

*********************************

Matt Taibbi has a review of Neil Barofsky’s book Bailout.  Taibbi focuses on the political gamesmanship and back stabbing aspect of Barofsky’s book while  I was shocked by the sheer amount of money we allowed the banks to have access to without any oversight.  Anyway, it’s all connected with what is about to fall down on Elizabeth Warren.

It’s the best $9.99 you’ll spend at Amazon this month (for the Kindle edition).

Uncomfortable conclusions

Matt Taibbi has a follow up to his Secrets and Lies of the Bailout article in the Rolling Stone.  This one, called “One Broker’s Story” is about the consequences of the bailout to ordinary brokers as a result of asymmetric information.  Neil Barofsky hinted at this in his book Bailout when he described all of the money that the government let the banks have access to.  It amounts to trillions and trillions of dollars.  It’s a little like opening the bank vault doors to people who have a habit of setting money on fire and telling them, “We know you didn’t mean to burn up everyone’s nest eggs.  Now, don’t do it again.”

Trillions and Trillions.  Imagine all of the money that the Republicans are constantly going on about in the deficit crisis hysteria and multiply it my several times over.  The social security shortfall requires a minor adjustment, a teensy tweak.  But the amount of money we have thrown at bankers and allowed them to access whenever they want is vastly, vastly larger.  When it comes right down to it, the bankers pretty much own the money supply.  They can tap into it whenever they want, charge interest on money they lend to others on money they got virtually interest free, and they don’t have to tell you about it.

The hapless broker in Taibbi’s story didn’t know that the bank he worked for, Wells Fargo, had access to all this cash.  He was looking at the fallout of the 2008 disaster, estimated the financial solvency of all of the major banks and decided to short them because he figured it was only a matter of time before they started falling like dominos due to the weight of all their bad assets.  But the broker didn’t know that all these banks had nothing to worry about because not only did the US government bail them out, it covered up their problems and then opened the money sluice to them in perpetuity.  So, stocks continued to climb in spite of all evidence to the contrary and the broker lost his shirt and everyone else’s shirts he did business with.

He only found out when Bloomberg filed a FOIA to obtain information on where all the bailout programs money was going.  The banks and the Treasury (and the White House, I’m sure) were hoping to keep it a secret as long as possible.

What the stock market is showing everyday is an illusion.  The banks are doing well because they’re being propped up by our money.  That is the observation.  The question is, why?  Why are we allowing the banks to have so much money?  Why aren’t we letting the market suffer?

I think it comes back to the 401K and IRAs again.  So many of us have so much of our money locked into the market instead of pensions that if the government let the market sink to its natural level, there would be a social and political crisis.  It is a vicious circle.  And we can’t take our money out to start new businesses or pay debts or just live without paying punitive taxes.  Those taxes virtually guarantee that the money stays in the market.  So, the government has to prop up the market until it can’t be propped up anymore.  That should happen when the next bubble bursts on Wall Street.

Taibbi finishes the post like this:

This is the real problem with the bailouts, and the issue we tried to underscore with the “Secrets and Lies” piece. With their hide-and-seek policies, bogus stress testing and stubborn insistence on calling failing banks healthy and publicly endorsing other such fibs, the architects of the federal rescue (from both the Bush and Obama administrations, as well as from the Federal Reserve) created a two-tiered market. The new economy has two classes of investors: those who know the real numbers, and those who don’t.

So while the proponents of the bailout will argue they were a success, and the covert and overt federal support helped bring the Dow all the way back from below 7,000 to above 13,000 – seemingly a good thing no matter how you look at it – there’s another bitter reality, which is that the bailouts officially created a sucker class.

When banks started making fortunes again in 2009 and beyond, it wasn’t a victimless situation. There were losers in this trade, too. Hartzman and his clients are examples of the kind of people who lost when the government made decisions about who’s entitled to the truth and who wasn’t. As one former hedge fund manager put it to me recently, “Joe Sixpack has no chance in this market.”

We are the sucker class.  Well, some of us are suckers.  Some of us weren’t suckered into voting for Obama either time.  Ultimately, the responsibility for this fiasco falls on his shoulders and those of the people he hired.  And the people who unquestioningly supported him.

********************************************

And about that $1Trillion platinum coin, mint the damn thing already.  As Krugman pointed out yesterday:

There seem to be two kinds of objections. One is that it would be undignified. Here’s how to think about that: we have a situation in which a terrorist may be about to walk into a crowded room and threaten to blow up a bomb he’s holding. It turns out, however, that the Secret Service has figured out a way to disarm this maniac — a way that for some reason will require that the Secretary of the Treasury briefly wear a clown suit. (My fictional plotting skills have let me down, but there has to be some way to work this in). And the response of the nervous Nellies is, “My god, we can’t dress the secretary up as a clown!” Even when it will make him a hero who saves the day?

The other objection is the apparently primordial fear that mocking the monetary gods will bring terrible retribution.

It sounds like another civility bluff to me.  The bullies announce they are going to steal your lunch money, push you down in the dirt and stomp on your face but if you protest or come up with some clever workaround, they start heading to the fainting couch with the vapors.

Normally, I’d say that this kind of silliness with the coin is just going to make the matter worse because who in the world will take us seriously.  But there shouldn’t be any real economic fallout, so mint the damn coin.

On the other hand, maybe we should just call their bluff.  Let them wreck the economy, pull down our credit rating, sow chaos and confusion and ruin people’s lives.  I’m sick of Republicans pulling this shit.  They need to be terrified of the consequences of their actions for a change.  If you mint the coin, they’ll just come back with something else to hold hostage.  So, let the babies have their way and get the end of the financial world over with.  It’s out of control and an unmitigated disaster and it’s going down eventually anyway.  Why prolong the suffering.  Let’s just lance the boil now and start over.   I want a capitalism without exploitation.

Reboot.  Do it now.

Read the latest Matt Taibbi article on the bailout

Secret and Lies of the Bailout

It’s got two very colorful opening paragraphs:

To listen to the bankers and their allies in Washington tell it, you’d think the bailout was the best thing to hit the American economy since the invention of the assembly line. Not only did it prevent another Great Depression, we’ve been told, but the money has all been paid back, and the government even made a profit. No harm, no foul – right?

Wrong.

It was all a lie – one of the biggest and most elaborate falsehoods ever sold to the American people. We were told that the taxpayer was stepping in – only temporarily, mind you – to prop up the economy and save the world from financial catastrophe. What we actually ended up doing was the exact opposite: committing American taxpayers to permanent, blind support of an ungovernable, unregulatable, hyperconcentrated new financial system that exacerbates the greed and inequality that caused the crash, and forces Wall Street banks like Goldman Sachs and Citigroup to increase risk rather than reduce it. The result is one of those deals where one wrong decision early on blossoms into a lush nightmare of unintended consequences. We thought we were just letting a friend crash at the house for a few days; we ended up with a family of hillbillies who moved in forever, sleeping nine to a bed and building a meth lab on the front lawn.

I haven’t read the whole thing yet but if Taibbi is consistent with Sheila Bair, Ron Suskind and Neil Barofsky, Tim Geithner is going to look pretty bad.  There was a point in Barofsky’s book when I finally realized the magnitude of the scam that just made my jaw drop and made me want to join the Doomsday Preppers.  It really is that bad.

There will be a quiz.

More…

This part is good.  I mean bad:

To guarantee their soundness, all major banks are required to keep a certain amount of reserve cash at the Fed. In years past, that money didn’t earn interest, for the logical reason that banks shouldn’t get paid to stay solvent. But in 2006 – arguing that banks were losing profits on cash parked at the Fed – regulators agreed to make small interest payments on the money. The move wasn’t set to go into effect until 2011, but when the crash hit, a section was written into TARP that launched the interest payments in October 2008.

In theory, there should never be much money in such reserve accounts, because any halfway-competent bank could make far more money lending the cash out than parking it at the Fed, where it earns a measly quarter of a percent. In August 2008, before the bailout began, there were just $2 billion in excess reserves at the Fed. But by that October, the number had ballooned to $267 billion – and by January 2009, it had grown to $843 billion. That means there was suddenly more money sitting uselessly in Fed accounts than Congress had approved for either the TARP bailout or the much-loathed Obama stimulus. Instead of lending their new cash to struggling homeowners and small businesses, as Summers had promised, the banks were literally sitting on it.

Today, excess reserves at the Fed total an astonishing $1.4 trillion.”The money is just doing nothing,” says Nomi Prins, a former Goldman executive who has spent years monitoring the distribution of bailout money.

Nothing, that is, except earning a few crumbs of risk-free interest for the banks. Prins estimates that the annual haul in interest­ on Fed reserves is about $3.6 billion – a relatively tiny subsidy in the scheme of things, but one that, ironically, just about matches the total amount of bailout money spent on aid to homeowners. Put another way, banks are getting paid about as much every year for not lending money as 1 million Americans received for mortgage modifications and other housing aid in the whole of the past four years.

It’s like the guys who made up these rules on the bailout never had to deal with children or adolescents.  I guess that kinda makes sense, given that they are all guys who probably have wives and nannies to do that stuff.

 

Neil Barofsky’s book is depressing.

Summary: Obama appointed the Mafia to run the Treasury.

You know it’s bad when your Democratic Special Inspector General for TARP who was appointed under Bush says the Obama Treasury appointees are worse.  Not only that but the HAMP program was constructed in such a way as to encourage mortgage foreclosure fraud by the servicers. Tim Geithner is not a nice guy.  Oh, no, he isn’t.  He’s a sociopath.  It’s just bad any way you look at it.  We’ve been had.  The banks own everything.

I don’t know if I can handle Sheila Bair’s book, Bull by the Horns, as well.  It might be too much.

Don’t let anyone fool you.  The good guys have left the administration with a couple of exceptions.  The rest have to go.  Clean them all out.

Tim Geithner and the Orient Express

The suspects arranged themselves on both sides of the aisle

Neil Barofsky who wrote the recently released book, Bailout, wrote a short review/impression of Sheila Bair’s new book, Bull By The Horns.  Both books cover roughly the same time period, during the financial meltdown and its immediate aftermath.  As Barofsky notes, he and Bair come from different sides of the aisle and have different experiences as public officials.  But they are united in one thing- their opinion of Tim Geithner.  Says Barofsky:

her observations and interactions with the Geithner-led Treasury Department and her thoroughly captured fellow regulators are strikingly similar to mine.

She too was cursed out by Geithner and subjected to many of the same dirty political tricks.  She also bore the brunt of misleading media attacks. She came to the same realization that I did that large chunks of the government were far more interested in preserving the status quo of the big banks than serving the broader interests of the American people.  And she similarly recognized that Treasury’s mortgage modification program was never really designed to fulfill the administration’s promise to help millions of homeowners.  Bair looked at the same bailout landscape that I did and saw the same favoritism toward Wall Street and betrayal of Main Street.

The day Bair’s book was released a journalist friend emailed me that she thought that Bailout and Bull by the Horns share “the same utterly surreal quality” and that I would “like it a lot.”  She’s right.  It’s always nice to find out that you were not the only sane person in the asylum.

So, add this latest book to the pile, including Confidence Men by Ron Suskind, that paints Tim Geithner as the guy who refused to flip the switch or throw the big bankers off the bridge in order to save the rest of us.

Speaking of trains, the theme of Geithner being a complete bastard deserving of some nasty fate reminds me of the Murder on the Orient Express.  In it, the body is discovered to have been the victim of not one suspect but all of them.  Each one of the aggrieved attempts to murder the victim by stabbing, unaware that someone else had gotten there first.  In Geithner’s case, he has managed to survive so far, like just another one of the vampires that the Democrats foolishly invited into the house four years ago.

But with each volume that recounts that tale from a different perspective, the personalities and actions of the players become clearer and the motives easier to understand.  Tim Geithner is the hand of the financiers, sent to the malware president they installed to make sure that their interests were protected even if that meant turning the country into a broken banana republic with decaying infrastructure, a ruined technology and industrial sector and a permanent underclass.  It remains to be seen which suspect will deliver the fatal stab but there’s no shortage of remaining suspects.

This is pretty bad, people.  The Obama administration has been worse than we anticipated.

The attempts of the Obama campaign to scare working class women into supporting him over Romney should be seen in the light of what he has failed to accomplish for them in the last four years, largely through the machinations of Tim Geithner.   Those Democratic loyalists who have been carrying the campaign’s water, spreading a steady stream of attacks on Romney, portraying him as indifferent to their plight, have been remarkably silent about what Obama has done for them.  Four years ago, they might have said that the jury was still out on Obama’s performance and there was still a good possibility that he would be their Democratic champion.  But in October 2012, the mystery is gone.  It is a bitter triumph if the campaign’s mouthpieces have managed to convince blue collar women to ignore their lying eyes and accept a manufactured reality.  The money must be really good and, you know, the health insurance premiums must be paid.

All of the lamenting about what Obama will do in his second term obscures the fact that these bloggers did absolutely nothing to challenge the party when they had a chance to make a difference.  Instead, they allowed the party to use their blogs as a means of disseminating manipulative propaganda while ignoring all of the administration’s collaboration with the banks to make those women’s lives harder.  It’s all crocodile tears and prostitution.

Ultimately, it is Obama who is responsible for appointing Geithner and allowing homeowners and businesses to get used by the banks.  Now that we have a better picture of what went on in 2009-2010 when Obama had a political full house and many executive branch tools at his disposal, it’s impossible to deny that he served the financiers.

If you serve Obama, you are serving the banks, just like Romney will.

*******************************

And here is Sheila Bair describing what she would have done to Citibank.  If you were a shareholder, it was a fairly terrifying scenario but given how badly Citi was mismanaged ($800 billion?? How is it possible for an entity not a country to rack up that much money in bad assets?), ultimately necessary.  Tim Geithner cut her off at the pass.

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