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Thursday: What the bankers bought with $600 million.

No seppuku for them.

Last week, we briefly discussed Japan’s lost decade.  In short, it goes like this: Japan’s bubble burst back in 1990-91 with the collapse of their real estate market.  The Japanese government took a mostly hands off approach to the recovery and even imposed some austerity measures, like tax increases.  That made their recession worse.  It wasn’t until 2001 when a new prime minister appointed a whiz of a finance guy that the Japanese economy started to come out of it’s big, black hole.  The remedy that worked was- ta-da-da!- getting tough with the banks.  Yes, the banks were mainlining borrowed money and using it to create even more ingenious ways of making up their lost cash.  Adam Posen called it “gambling with resurrection”.  The Japanese finally realized that being co-dependent to an industry with a gambling addiction was not in anyone’s best interest so they forced the banks into sobriety and voile!, the Japanese economy started to recover.  (I am beginning to see why the banking industry might not have wanted Hillary Clinton.)

Unfortunately, that’s not the approach we in the US are going to take.  No, we are not going to force the banks and bankers to have a day of reckoning.  We are going to postpone the intervention so we can draaaaaggg this recession out.  Why?  Well, to my untrained, non-econ eye, it appears that bankers and their shareholders are more equal than the rest of us wretched refuse.  The recession is going to be hard but not as hard on the bankers as it could be and, really, isn’t that what we all live for?  To make sure that the people who aspired to those positions can live in the style to which they have become accustomed?  YOU may get laid off and have to suffer, but why should they?  If they are living well, they serve as shining beacons on a hill, examples to us all.   We can all look up and say, “My tax dollars paid for that”.  It’s something to be proud of.

OK, some people in Connecticut clearly haven’t gotten the memo that we are to leave the poor bankers and their government welfare bonuses alone.  They are littering the poor, hapless bankers’ yards with furniture, simulating foreclosure.  That just pisses bankers off.  First they have to get Manuel to clean it all up and then they have to fly off to Aspen *weeks* earlier than they intended to.  What do these people want from them??  Isn’t it enough that they may be forced to survive on a measley $500K?

For those of you who want to know what Geithner’s plan means and how it will keep bankers safe, check out the two most recent podcasts from Planet Money:

Get Tougher, Please – Guest Adam Posen describes what needs to be done to banks to shorten the recession sensibly.

How to Save a Bank – A critique of the Geithner’s plan.  It falls short of what needs to be done to banks to shorten the recession sensibly.

At the end of yesterday’s podcast, I got a distinct impression that Adam Davidson and Alex Blumberg felt betrayed and depressed by the whole proposal.  You can hear it in their voices.  Jeez, I hope they weren’t Obamaphiles because that kind of rude awakening sucks, er, is of low quality. But what did we expect from Obama who got nearly a billion in campaign contributions from the Wall Street gang?  They need to keep shooting up and hoping that their brilliant schemes will pay off like one of Ralph Cramden’s “Get-Rich-Quick” ideas.

Oh, and one other thing.  I have read rumors that someone is floating the idea to tap into the Social Security trust fund for cash to get the economy rolling again.  Just a short term loan or something.  Yeah, Yeah, it’s just a parody but let’s just take the idea out of circulation right now.  Some of us who diligently stashed away money in our 401K’s are now looking at pretty fricking bleak retirements.  We may not have time to recover our losses before we’re given our gold watches.  Social Security had better be there for us, especially those of us who have been paying the surplus funds since we started working.  I’ll start my own March on Washington if anyone even *thinks* about tapping into it.

That’s a promise.