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.

 

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.

The NYTimes finally puts LIBOR on the frontpage

It took long enough.  This article even starts poking around the edges at the Federal Reserve Bank of NY:

As big banks face the fallout from a global investigation into interest rate manipulation, American and British lawmakers are scrutinizing regulators who failed to take action that might have prevented years of illegal activity.

Politicians in both London and Washington are questioning whether regulators allowed banks to report false rates in the run-up to the 2008 financial crisis and afterward. On Monday, Congress stepped into the fray, requesting information about the role of the Federal Reserve Bank of New York, according to people close to the matter.

 […]

On Monday, the oversight panel of the House Financial Services Committee sent a letter to the New York Fed seeking transcripts from at least a dozen phone calls in 2007 and 2008 between central bank officials and executives at Barclays.

“Some news reports indicate that although Barclays raised concerns multiple times with American and British authorities about discrepancies over how Libor was set, the bank was not told to stop the practice,” Representative Randy Neugebauer, a Texas Republican and the head of the House oversight panel, said in the letter, which was reviewed by The New York Times.

Tim Geithner was the head of the Fed in NY during the time frame in question.  It is hard for me to imagine that he didn’t know that LIBOR was being manipulated.  We have already heard the panic defense, that if the true LIBOR rate was known, a financial apocalypse would have swiftly followed.  But it’s the aftermath of the manipulations when the panic had subsided that intrigue me.  Tim Geithner gave a lot of advice to Obama that was very friendly to bankers.  But he must have known that a couple of banks, like Citigroup, were insolvent.  Yet instead of nationalizing those failed banks, we merely stress tested them, bought their toxic assets and bailed them out.

Much of our current unemployment woes and struggling economy can be traced back to those early days of the Obama administration when we saved the bankers and ignored everyone else’s needs.  There were many smart people who were in favor of being more aggressive with the bankers and making a strong case for a bigger fiscal stimulus package.  They were ignored.  You can blame the Republicans, if you are so inclined.  But let’s remember that the Democrats were in charge in the first two years.  We can only speculate how they might have come together to push financial reforms and New Deal programs if we had only known how serious the situation was.

Hiding the true nature of the financial collapse from our elected officials amounts to a coverup, in my humble opinion.  It’s a coverup that cost many of us our houses, jobs and security.  Heads have got to roll for this one and THIS time, we have to demand that the parties responsible are held fully accountable.  There has to be real reform and perp walks or our present economic environment will never get better.

Yes, it sucks for the White House that it all comes to light in an election year.  What can I say? When you sell your soul to a bunch of people who have more money than God, they usually expect something significant in return. It looks like they got it.

Has someone found a smoking gun?  Reuters reports that Geithner had a “Fixing LIBOR” entry on his calendar in 2008.  Does that mean fix the rate or fix the problem with banks manipulating the rate?  Such ambiguity.

In early 2008, questions about whether Libor reflected banks’ true borrowing costs became more public. The Bank for International Settlements published a paper raising the issue in March of that year, and an April 16 story in the Wall Street Journal cast doubts on whether banks were reporting accurate rates. Barclays said it met with Fed officials twice in March-April 2008 to discuss Libor.

“FIXING LIBOR”

According to the calendar of then New York Fed President, Timothy Geithner, who is now U.S. Treasury Secretary, it even held a “Fixing LIBOR” meeting between 2:30-3:00 pm on April 28, 2008. At least eight senior Fed staffers were invited.

It is unclear precisely what was discussed at this meeting or who attended. Among those invited, along with Geithner, was William Dudley, who was then head of the Markets Group at the New York Fed and who succeeded Geithner as its president in January 2009. Also invited was James McAndrews, a Fed economist who published a report three months later that questioned whether Libor was manipulated.

It doesn’t look like LIBOR got fixed.  But clearly, Geithner knew what was going on.  And if he didn’t have a come to Jesus meeting with politicians right after he took office to explain how dire the situation was, then what can we conclude except that he was operating in the bankers’ interests at the expense of ours?

This s^*( is serious.  It affects mortgages, credit card rates, student loans and economic health and every decision that has been made in the past 4 years.  The timing is even crucial.  These meetings were taking place in the middle of the primary season when money was pouring into Obama’s campaign coffers from Wall Street and crazy Obots were screaming for Hillary Clinton to quit the race even as she was still winning big state primaries.  We know from other sources that the meltdown started in 2007.  So, even our primaries might have been affected by the shaky bank situation.

Darrell Duffie, a Stanford University finance professor who has followed the Libor issue for several years, said that he believed regulators were “on the case reasonably quickly” after questions were raised in 2008.

“It appears that some regulators, at least at the New York Fed, indeed knew there was a problem at that time. New York Fed staff have subsequently presented some very good research on the likely level of distortions in Libor reporting,” Duffie said. “I am surprised, however, that the various regulators in the U.S. and UK took this long to identify and act on the misbehavior.”

Surprise!

One last thing: If Geithner want to fix LIBOR in April of 2008, why did it take the CFTC to launch an investigation about it in March of 2011?  You’d think something as big and potentially litigious as a LIBOR scandal would have prompted swifter action. The fact that that didn’t happen suggests there is some bigger thing that is being covered up.  I can’t imagine what it is but it must be huge.

Common Sense and the sensus communis: anatomy of an American pressure cooker

Gay-Lussac

The pressure of a fixed mass and fixed volume of a gas is directly proportional to the gas’s temperature.

This relationship is known as the Gay-Lussac’s Law and a pressure cooker is an example of the law in practice. Cooking under pressure creates the possibility of cooking with high temperature liquids because the boiling point of a liquid increases as its pressure increases. High pressure and high heat can result in delectable dishes.

Cooking under pressure can be also dangerous because as liquids change phase into gases their volume expands greatly. For example, at atmospheric pressure the volume of steam is about 1700 times greater than the volume of water. To prevent pressure cookers from becoming bombs, relief devices (pop safety valves) are employed that are capable of relieving all of the steam the vessel is capable of producing.

America the Beautiful Pressure Cooker

The political pressure cooker is beginning to heat up. The power brokers and institutions that drive the nation have arrived unannounced on the doorsteps of America like a gaggle of unwanted, high maintenance relatives that demand hospitality for an unforeseeable time and that won’t take no for answer. Furthermore, they’ve announced that more relatives are on the way. Whatever plans America’s householders had, they’ve just gone out the window, with their household budgie and the relatives’ cat in hot pursuit.

People are justifiably angry with this incursion. Their budgie might not have been much, but it was “their budgie”, nurtured from birth into what it had become. Justifiably angry householders are trying to work out why the relatives arrived on their doorsteps and why they brought their fucking cat.

Tuesday Ramblings plus a Caption This Photo!

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Hello my dearest Conflucians!  We’ve been doing a lot of money talk here at the blog.   Even though I don’t know jack about finance or economics like my more illustrious brethren here, I thought I’d add my two cents (about what we all have in our wallets and purses now) regarding the crisis.

So, anybody feel that Obama brand of Hope pouring through your soul?

Yeah, me neither.

Instead, I feel fear and cynicism all rolled up in a ball of “f__k you” and it’s the same kind I felt during the Bush 2.0 years.

Remember 7 years ago when Bush took office and brought us the Iraq war based on false information?  Yeah, and 7 years later we are still fighting that war.   BASED ON FALSE INFORMATION.   From my view at the bottom of the totem pole, I can’t shake the feeling that our financial meltdown is engineered the same exact way the Iraq War was.  And since it’s Tinfoil Tuesday (h/t to Stateofdisbelief), I’m betting that all this financial meltdown is an illusion made to appear like a crisis/catastrophe.  Here’s a quote from Conflucian Resident Economist DakiniKat that really stuck out at me:

The market seems to have stabilized for awhile as Ben Bernanke has been giving speeches and making appearances every where he can.  For those of you  that really want to take on empirical studies in Economics (econometrics and all), this is a part of a strategy he outlined in  Monetary Policy.

From my simplistic, peasant, lay-woman’s point of view, Wall Street is just some glorified Las Vegas gambling casino without the neon lights and flashy shows, although it very well could be.   It’s all speculation, opinion-based gambling.  For example, if there’s a rumor that corn farmers are scared that next years crops aren’t going to be as plentiful as last year, suddenly you see corn stock (pun intended) plummet and by the end of the day thousands of workers are laid off.   All based on speculation.  There’s no gradual or incremental adjustment to curtail the possible loss of corn, no riding out the storm, none of those things.  Actions are taken swiftly and severely in a matter of hours.  You punch in at 8 am, rumor gets released at 9:30am, stockbrokers go bezerk on the trading floor by 10:00am and you walk out with a pink slip by 5:00pm.   Who suffers?  You and me.  Who started the rumor?   No one will ever know (because no one is held accountable anymore), maybe a sugar ethanol lobbyist firm, who knows?   Then the fear/hope peddling cycle goes wash, rinse, repeat.

Yet in the same way Wall Street reacts to bad news via the government, all it takes are positive words and Wall Street shall be healed.  Here’s what Big Dawg said:

It used to be gospel in the nation’s power center: Presidents didn’t talk publicly about what the markets were doing. The notion was that anything a president said on this subject could be too easily misinterpreted, sending Wall Street into a dive.

Now, former President Clinton says he thinks President Barack Obama should talk more optimistically about the prospects that the nation will recover from its current deep economic woes.

Remember Obama’s quote regarding pressuring Congress to pass the stimulus package because  “a failure to act “could turn a crisis into a catastrophe.” President Obama learned that fearmongering got Bush 2.0 what he wanted, so he’s continuing the fear-peddling push.  Scare the masses into submission!  Worked for Stalin & Bush 2.0.  F__k Hope.

Color me a rainbow of stupid, but I ask myself the following questions:

• If Wall Street is the gear that keeps America afloat since so many of our conglomerates which own everything trade publically, why do they depend on the government for morale-boosting if they are that powerful?
• Why is it that Wall Street trading goes up when positive words are spewed by the President and the Cabinet, or it goes waaaay down when negative words are said, like “stimulus package?”
• Who the f__k is really in control?  Is it truly Wall Street?  Who controls who?
• And why is it that the only people that are benefiting from everything are banking conglomerates? And like MYIQ said below, where’s the money?
• Bush 2.0’s agenda was clear as a bell.  Bush 2.0 started a war to get the oil speculators going batsh_t crazy and hike the price of gas and oil, which made Exxon-Mobil and other oil companies VERY happy while many families around the world choose between fuel or food.   But what is Obama’s agenda? Instead of oil, Obama is favoring the super elite global bankers.   What is it that global bankers want?
• And what happens to us, the people who sweat and bleed to make this country the great place it should and could be?

Well, looks like Obama and the O Cabinet are heeding Big Dawg’s words, because some of the pesky peons that Hillary and Bill understand so well  (i.e. the people footing the bill a.k.a you and me) aren’t as drunk on the Hopium as Obama (and the media) would like.  Daily Telegraph from the UK has this to say:

Barack Obama goes upbeat on economy after popularity declines

President Barack Obama has launched an upbeat strategy over the economy in the face of approval ratings that have dipped below those of George W Bush at the same stage of his presidency.

As well as sounding more optimistic, the president will push more aggressively against Republican critics – painting them as belonging to a “party of no” – and sharply remind the public that the problems he has to cope with were very largely inherited from Mr Bush.

Mr Obama is changing his rhetorical course after criticism from fellow Democrats, including former President Bill Clinton, that he has sounded too negative in the first weeks of his presidency.

This week he will speak forcefully to Congress and the public about the need to pass his $3.6 trillion budget, which will double the national deficit, while stressing his belief that there is hope ahead.

Mr Obama’s sky-high approval ratings have fallen in the past couple of weeks amid widespread gloom over the economy. His approval rating is between 56 and 60 per cent, lower than George W Bush’s at a similar stage of his presidency.

The new president has already told an audience of business leaders that the economic crisis “is not as bad we think”. Over the weekend, Mr Obama assured investors of the soundness of investments in the US economy, after Chinese premier Wen Jiabao expressed his alarm about the safety of the “massive” number of US Treasury bonds Beijing was buying.

“There’s a reason why even in the midst of this economic crisis you’ve seen actual increases in investment flows here into the United States,” Mr Obama said. “I think it’s a recognition that the stability not only of our economic system, but also our political system, is extraordinary.

“I think that not just the Chinese government, but every investor, can have absolute confidence in the soundness of investments in the United States,” he added.

And of course, let’s make China super confident that their investment in the US of A is safe and sound.   Ni Hao, Wen Jiabao!  A-OK in the USA!  Mi casa es su casa, right Wen?

But wait, here comes Larry to add his input as well:

Lawrence Summers, chairman of the national economic council, exemplified the administration’s new approach with a populist swipe at AIG for paying in excess of $100 million in bonuses to staff, despite receiving $170 billion of taxpayers money.

“There are a lot of terrible things that have happened in the last 18 months, but what’s happened at AIG is the most outrageous,” he said on ABC on Sunday.

Mr Summers has also said Americans are showing “too much fear” about the economy.

Ok, let me stop right there.  Larry Summers???  Populist???  Outraged over AIG getting bonus money from the bailout???  BWAHHAHAHA!!!!   Slap on the wrist for AIG!  Bad little bankers!   Americans showing too much fear?  So it’s now OUR FAULT we’re feeling fear?  BTW, China, it’s not our corrupt government giving banking conglomerates unlimited amounts of money that’s at fault, it’s our citizens freaking out over nothing!  Nothing to see here.

Earth to Larry Summers:  When you are at your job and 1/2 of the workers on your floor are suddenly asked to leave at the bat of an eye, wouldn’t you be afraid?   When you’ve scrimped and saved for retirement only to watch that 401K lose 10-15 years worth of investment, with businesses suddenly shutting down, industries coming to a screeching halt, wouldn’t you be afraid?   It’s like RD said this morning:  it’s financial terrorism.  And with oligarchal and misogynist assholes like Larry Summers (among the many in Obama’s cabinet), running this whole speculation game from his cushy office, betting on fear/hope and gambling away the future of America like a craps game in the Bellagio, I’m very frightened.  And there is nothing Larry or his puppet prince president can do or say anything to change that except saying the words “I RESIGN FROM OFFICE, EFFECTIVE IMMEDIATELY.”

Despite the control the financial sector has on the White House, Wall Street also controls the financial sanctity of our nation.  If all they need are inspiring words to invest and trade confidently for our nation to prosper, I hope that they can see these:

I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.

Thomas Jefferson, (Attributed)
3rd president of US (1743 – 1826)

Let Thomas Jefferson repeat that last part again:

The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.

And with the 2 or 3 bailouts (I’ve lost count) – WE, THE PEOPLE, are the owners of these institutions.  We always had the power, it’s just that the perception buttons of hope/fear is what controls Wall Street and in turn, Wall Street controls our livelihoods and/or survival.

And I’m f__cking tired of it.

I was going to post Rage Against the Machine’s – “Killing in the Name,”  but for some reason the video’s not showing in the preview, so here it is.

The financial machine  is killing the name of life, liberty and the pursuit of happiness.  I don’t know what to do next, except the only thing people do when they’ve had enough.   Protest.

PS:  To the Irish Conflucians, Happy St. Pat’s Day!

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Tuesday: Yeah, why *are* we giving bailout money to foreign banks?

Gretchen Morgenson, finance reporter for the NYTimes, gave an interview to Terry Gross yesterday.  Terry must be on the road to Kool-Ade sobriety.  She didn’t sound nearly as hopeful about Obama’s Change-tastic administration.  Come to think of it, even I didn’t expect Obama to be this bad.  It simply boggles the mind how  strongly the finance giants have him in their grip.

There weren’t any standout quotes from the interview.  Morgenson is calm and direct, unlike Adam Davidson on Planet Money who was boiling mad over the bonuses on yesterday’s podcast. ( Anger is good, Adam.)  But Morgenson asks some great questions like why is US taxpayer money bailing out foreign banks like HSBC?  She gives a little bit of the background of the credit default swap industry and says that the whole ingenius concept of this nifty little “instrument” that brought the world economy to its knees started in London.  Well, that’s something we didn’t know before.  Was this some kind of British revenge for that Independence thing?  Were they just waiting for the right moment to unleash havoc?

Terry seemed to be pretty bummed about the bonuses that AIG employees are getting.  The retention bonuses are a way of keeping the bastards from fleeing the company in pursuit of greener pastures, like that’s going to happen.  Morgenson thinks that AIG’s insistence that they must be paid because of some unbreakable contract is a form of blackmail.  Plus the instruments are so confounding that only the geniuses that put them together can resolve them.  She’s also pretty skeptical about the legalities of the contract.  Bankruptcy judges are in the habit of breaking contracts to satisfy creditors so why not in this case?  If I were an auto worker, I’d be ready to march on Washington over this bull$#@% argument.  The UAW has been forced to renegotiate labor contracts to keep the auto industry from going under.  Hmmm, do you think Obama will get their endorsement next election season?

But let’s think about this bonus-retention idea for a second.  Are the AIG guys saying behind closed doors, “Give us the money with no strings attached and we’ll get you out of this mess.  If you don’t, we pull the plug on the world’s markets.”?  Because if they are, I’d call their bluff.  No, seriously.  Call me crazy but that sounds like terrorism and we don’t negotiate with terrorists.  What we do with terrorists is declare them enemies, put them in jail while they’re awaiting trial and seize their property.  Then we can force the shareholders to “take a haircut” as Morgenson says, provided pension funds are covered with the bailout money first.  I mean, why are Geithner and Summers playing patty-cake with these people?  It’s not rocket science anymore.  These are bad guys.  They are holding a financial gun to our heads.  Throw their asses in jail already, impose some huge bail so they don’t flee and make them sit in a cold and lonely cell until they come to their senses.  I give these cushy bastards a weekend before they crack.

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Bad Bank, Bad Bank! Or I’m not an economist, but this sounds REALLY Bad to me

Does the idea of a Bad Bank have anything to do with this  story from a couple of days ago?  And can they REALLY be thinking of a $4 Trillion Bailout?  For Banks?  Well, remembering this:

Schumer’s $3-4 Trillion Horror Story

While questioning Treasury nominee Tim Geithner at his confirmation hearing this morning, Sen. Chuck Schumer said he spent some time calling around Wall Street this weekend, and what he heard was that if the government wants to clean out all the toxic assets from the financial system, it will cost some three to four trillion dollars. Which is to say, an order of magnitude larger than the second $350 billion in TARP money the Senate just approved.

That’s pretty daunting stuff when you consider that the banking system probably won’t recover until most of this bad debt gets cleaned up. And that the economy won’t recover till the banking system does. Alas, the only thing worse than spending $3 trillion to clean up the banks may be not doing it.

That doesn’t sound like a joke.  Then today  via Calculated Risk we learn that the idea of a Bad Bank is close to a sure thing:

The Obama administration is close to deciding on a plan to purchase bad—or non-performing and illiquid—assets from banks, according to industy sources. The plan could be announced early next week.

The so-called “bad bank” plan, would address the key problem of how to price the assets by using a model-pricing mechanism.

The model would take account of the government’s ability to hold onto assets, even to maturity, and pay for the them with cheap funding. Result: the government might end up paying more than current market prices for the securities.

. . .

Clearly, the idea of a “bad bank” is gaining momentum. On Capitol Hill today, Senate Banking Chairman Chris Dodd said he was aware the idea is under discussion and “it makes some sense to me.”

The move toward a bad bank concept comes amid growing speculation that banks may need another government bailout.

Jesus! No wonder they’re so sure we can’t finance Health Care For Everyone.  We’ll be lucky to buy toilet paper when this is all over.

Monday: Bi-Partisan Bank Robbery?

I don’t pretend to understand Credit Derivative Swaps and financial ‘instruments’ and it looks like the people who have been playing with them for the past eight years don’t understand them either.  But we better all get some ejucashun and nollij about them toot sweet because Treasury Secretary Paulson is about to give clean out the treasury to bail Bush’s buddies out of trouble.  Well, we can hardly blame them. Opportunities like these don’t come around often and time is running out.

We should have seen this coming.  The Bushies have been looting ever since they took office.  If they’re not saddling us with tremendous debt from some unnecessary war and loading up planes full of money to Iraq, they are rewarding their lobbyist friends with sweetheart deals.  They’ve really exceeded their daily chutzpah with the last one.  If you have been following Anglachel’s Journal for the past couple of days the plan is clear and the fix is in.  It sounds like Paulson is planning to hand over $700 billion dollars of your hard earned tax dollars to the firms on Wall Street to buy their assets.  The claim is that this will prevent a massive financial meltdown and Depression.  Under that scenario, we the people should expect something in return, like, I dunno, greater oversight?  Accountability?  Regulation?  Nope.  Paulson is saying we should just give these people the money and trust them.  AND instead of asking some of them to take what is “fair market value” for their depreciated real estate assets, which would mean they are perhaps 35-40% underwater, Paulson has decided to give them greater than market value for these turkeys.

But wait!  There’s more.  If you been paying attention, Hillary Clinton has been proposing something like the Home Owners Loan Corporation (HOLC) where the government would restructure and refinance bad mortgages from individual homeowners and make them affordable.  The theory goes that if those homeowners are able to pay their loans at more reasonable rates, the money would start flowing back to the banks, increasing their solvency.   And not only is this a beautiful theory, it has actually been done before- successfully.  It was implemented during the Great Depression.

Of course, that would mean that the banks would take a loss on some of their investment ‘instruments’(God, I hate jargon.  Why not just call it a con game and get on with it?).  And the financial institutions would prefer that YOU the taxpayer is stuck holding the bag, not them the royal f%($-ups.  It *seems* like this was their plan all along.  Play with other people’s money, suck up all the extra liquidity there is in the economy, deregulate everything and when it looks like the whols she-bang is about to go under, scream that the sky is falling so citizens panic about their money and the Treasury cuts yet another sweet heart deal that leaves the rich guys off the hook.

We can’t let it happen this time, guys.  If the economy is really on the verge of collapse, then the financial institutions have to make sacrifices just like everyone else in order to fix it.  Otherwise, the FDIC will be wiped out and everyone’s money is at risk.  Not that Mr. Moneybucks cares.  He’s got his.  You get yours whatever way you can.  If you don’t have friends in high places, tough noogies.  Well, we DO have some friends in high places.  Hillary has a plan, but doesn’t she always?  The question is, will the rest of Congress get religion and where do Obama and McCain stand on the issue?  We need to hold their feet to the fire.  On that note, Sarah at Corrente has some suggestions:

First, and foremost, write and call and email — not just one, but all three — your representatives. Local, state, and federal. Send copies of your letters to the media. Demand Bu$hco’s bailout plan be scuttled NOW.
Second, get out of debt. If you’re contemplating buying something on credit, hold off 30 days.
Third, make sure any checking or savings accounts you have are within the limits of and with institutions covered by the FDIC. If you’re one of the lucky few who’ll have to move some money to do this, get after it.

And in the latest twist, Goldman Sachs and Morgan Stanley have transformed themselves from investment banks to bank holding companies subject to greater regulation.  That initially sounds good but there’s a catch:

In exchange for subjecting themselves to more regulation, the companies will have access to the full array of the Federal Reserve’s lending facilities. It should help them avoid the fate of Lehman Brothers, which filed for bankruptcy last week, and Bear Stearns and Merrill Lynch — both of which agreed to be acquired by big bank holding companies.

So, it looks like Goldman Sachs and Morgan Stanley remain intact, just in time, and avoid acquisition by other banks because they are able to rely on the Federal Reserve to rescue them before they are declared insolvent.  Sweeeet!  Must be nice to have a sugar daddy in government.  Oh, you don’t have one?  That’s because you are supposed to be self-reliant!  Responsible!  A rugged individualist!  It builds character when you have to pull yourself up by your bootstraps.  What?  You haven’t got any boots?  Well, whose fault is that?  This isn’t socialism, ya’ know.