The Bailout of Big American Banks Has Cost Trillions More Than We've Been Told

George Washington's picture

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mrhonkytonk1948's picture

Also highly plausible that the equity markets are being manipulated higher to quiesce the lumpen proles prior to the election season and set the stage for a profitable exit by the Guv from C.

Enkidu's picture


Good work GW. Question: could The Fed sub-contract the paying down of The Debt to the Big Bankers? i.e. give 'em a trillion and let them do The Perfect Trading Quarter (give 'em 10% commission)!!


Bringin It's picture

That raises the potential of conflicts of interest, problems of front-running, using that inside information ..."

So let me guess that Goldman would say something like - We would never blah blah blah

Doesn't the Fed say the same thing?  Doesn't the private bank that is the Fed have this problem in spades?  Oh, never mind that's right ... they would never  blah blah blah


Great work George.

Illya Kuryakin's picture

Damn this really pisses me off.

Bringin It's picture

Illya - I always wondered what happened to you and now you're here on ZH too!  Where's Solo?

RichardENixon's picture

Damn we're getting old. When was that show on, 1965?

Voluntary Exchange's picture

What we must not do is cry U.N.C.L.E. to these pirates.

Turtle49's picture

12:29am local time at Area 51:  Now I lay me down to sleep.  I pray the aliens my leaders (including but not limited to the bankers and elected officials) to take -- and return to any planet other than Earth.  Oh well -- tomorrow is another day and my savings will be robbed again.

Voluntary Exchange's picture

That would violate the "prime directive".   We must solve our own problems.  That's why we are "here" to begin with.  I suggest you get to know your neighbors really well while there is still time to do so.  The times, they are a changing.

Bringin It's picture

There used to be community in America.  Now there's American Idol.

I agree.  It is time to find or create community.

jeff montanye's picture

excellent points all.  the "progressive economist" citing the massive redistribution of wealth to bank stockholders and executives could have added bondholders as well.  at least the stockholders have received some (much deserved) capital losses.  the bondholders have taken nary a haircut and their interest payments have been guaranteed to the penny (contrast with the car companies' version of socialism for capitalists).  

if the msm took half as much time elucidating these points as they do the drug and sex habits of hot young women in the l.a. area, the pitiful political parties we have might just be a tad less sad.  oh, that's right.  that's why it's done.

guidoamm's picture

... and lets us not forget... the MOTHER of all covert bailouts...

By allowing banks to legally disregard mark-to-market accounting rules, government allows banks to maintain investment grade ratings.

By maintaining investment grade ratings, banks attract institutional funds. That would be the insurance and pension funds money that is contributed by the citizen.

As institutional money pours in, the stock price is propped up, the banks are recapitalized AND... drum roll... since bonuses are paid out of total turnover rather than out of net profit.... ta-daa!... big bonuses for the directors...

Anyway! It's all par for the course. In a fiat monetary system, the end of the inflationary cycle must be contrasted by exactly these tools if the state is to survive... so this is not a surprise... 

The more immediate concern is that these policies are inherently exponential in character thus their effect is inherently diminishing... unless the cycle is broken via voluntary debt write-off, the inescapable conclusion of the trend the authorities have chosen, is social upheaval... and as social unrest raises its ugly head the authorities are going to need something to concentrate the mind of the masses away from the plundering occurring at home... historically, global conflicts ensue this sort of juncture...

A bon entendeur, salut!

Steaming_Wookie_Doo's picture

"By maintaining investment grade ratings, banks attract institutional funds. That would be the insurance and pension funds money that is contributed by the citizen."

And that is the real disaster than no one wants to confront. John and Mary Public's pensions are worth shit if they are tied into these fraud bank stocks. Some 70 million people may have to face the fact that they can't retire at all, or face severely diminished standards of living. Further down the lalalalalala I-can't-hear-you hole, the social security check they will be relying on (if they are brave enough to retire) is already too small and will have a serious erosion of purchasing power as this fiat-a-thon printing devalues what few dollars they do receive.

Any bets on suicide-bomber grannies in the next few years?

Sudden Debt's picture

For capitalism to work, there is a need for rich people and poor people.

Rich people keep on being rich :) : CHECK

Poor get more poor : CHECK


Conclusion: Capitalism is working at it's best right now! Let's have a donkey ride on the poor!

You don't hear me complaining :)

Voluntary Exchange's picture

You are misusing the word "capitalism".  We don't have capital, we have debt. There is a huge difference.  When we had true savings with real money instead of debt and  the cursed fiat currency the free market continued to make the middle class bigger and better throughout the 19th and starting the 20th century but then we switched to no capital, debt, fiat currency, fractional reserve, and all the government/big bussiness tricks that we have today.

People ought to:  Study Rothbard; study Ludwig Von Mises; study Thomas Woods; study Hanns-Hermann Hoppe;  Study history. Those who actually think we have "capitalism" have no idea how a free society is supposed to work. They do not understand why a free-unencombered market is always superior to government "regulation" - which power always eventually turns into a means of helping the few at the expense of the many.

Alexandra Hamilton's picture

Capital is not limited to money. Capital means also 'means of production, distribution, exchange and communication'. These are all owned and controlled privately. The private debt that has allowed Capitalists to accumlate all this capital has now conveniently been dumped on the public (i.e. the state). So, it's now their wealth and your (our) debt.

This is called state capitalism, but simple because people can vote. If it were to become any more authoritarian, it would have to be called fascism.

i.knoknot's picture


VE, while you make a lot of (harsh) assumptions about this bloke based on a clearly simplistic post,  using pure statistics alone you are probably 98% likely to be correct, given a random sample of americans (humans?)

without a defined collateral base under a dynamic financial system, the wealth resides with the cleverest liars, who have the police-of-the-day convinced that *they* are the ones to protect.

once the layers unravel, it's the folks with the 'stuff' and/or 'guns' that are left standing until the game resumes in its next form...

an honest financial system, regardless of the layers that may come to wrap it, is composed of auditable/credible promises and appropriate counter-party incentives/punishments.

right now we have neither of those elements, nor the collateral to back any of it.



Voluntary Exchange's picture

Yes, I tried to limit the wording of it to those who ACTUALLY belive we have capitalism, in which case only simplistic counter posts could be understood. (The actual poster might very well be sarcastic about things and quite cleaver).

Another big change I would have made to the American system at it's inception would have been no "limited liability" loopholes. They always eventually become tools for those who choose to live by deception. A properly constructed explicit contract would deal very harshly with fraud and any attempt at deception, and the adjudication/arbitration providers, and security service providers would be part of the explicit contract in a strictly free society.


i.knoknot's picture

i hope you realized i was in full agreement with your post. ++

re: limited liability - agreed also. all legal/judicial systems exist because of the inherent weaknesses of human communication and ever-changing context. consider the average marriage contract. is what you die with what you married? yet it (mostly) works. some come out ahead, some... not-so.

i would hate to stuff that reality into a system of laws, but without the liability you cite, we are guaranteed to fail.

good posts, both.

Strider's picture

You know the dumb part about this hole Emperor's new clothes is that there is some consensus that the market should go up discounting the fact that the only reason the markets were EVER higher than here  was due to bullshit credit default swaps among other devious synthetic realities like Dot coms and Enrons. Why dont I ever see someone addressing that fact that maybe the market has a ceiling and its 1000 ? It has never gone above this without some exotic play with no back bone. The reality is that the market has hit the edge of its reality again and Wall street is at a loss to play the next hand without a manufactured exotic edge while the SEC is looking up its ass under a microscope.

Thats what inning this game is in. Either let them manufacture a new weapon of financial destruction or admit that there is no market above here.

Duuude's picture

Thanks GW. Please forward to John Bogle. I've been wondering where he stands on all this.