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Giant Banks Are Trying to Make Bailouts Permanent. They'll Succeed Unless We Raise a Ruckus

George Washington's picture





 

According to the following Democratic and Republican congress
members, economists, financial experts and journalists, the "too big to
fails" (with help from bank-friendly voices in Congress) are trying to
make the bailouts permanent:

  • Congressman Brad Sherman, who serves on the House Financial Services Committee, and was formerly an accountant, and other Democrats in Congress
  • Congressman Spencer Bachus, the ranking Republican on the House Financial Services Committee, and other Republicans in Congress
  • Peter Wallison, financial policy study analyst at the American Enterprise Institute

Unless we break up the too big to fails, they will again make speculative gambles that drive them into insolvency (as they have again and again),
and the government will bail them out over and over - perhaps secretly
- sending the American taxpayers the tab (through taxes or inflation).

 


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Thu, 12/10/2009 - 21:54 | Link to Comment Mark Beck
Mark Beck's picture

Well when it comes to CIT group the bailout became permanent. The Bail out is essentially a transfer of funds from the Treasury to the banks in exchange for equity or other SIVs. If the bank files for bankruptcy, the government should be first in line, but probably first in line for pennies on the dollar, if that. The point being, there is no need to make loans permanent, when the borrower was already insolvent upon receipt. The mal-investment has already been made.

Mark Beck

Thu, 12/10/2009 - 18:28 | Link to Comment Andrei Vyshinsky
Thu, 12/10/2009 - 18:07 | Link to Comment sysin3
sysin3's picture

"We" make it better ?  You got a mouse in your pocket ?

Because the rest of us collectively don't amount to dog crap on the bottom of Goldie's shoes.

We are so screwed we can't even see "screwed" from here.

Thu, 12/10/2009 - 18:01 | Link to Comment Anonymous
Thu, 12/10/2009 - 17:39 | Link to Comment i-m a dinner jacket
i-m a dinner jacket's picture

Just a test query - what would it take for you lot to trust a bank that claimed to back its notes with ....say, precious metals?

Inspections of the vault at regular intervals? Journalists and the public at all board meetings?

Just supposing there was such a bank, how big would you want the lending multiplier set?

 

Thu, 12/10/2009 - 21:15 | Link to Comment Howard_Beale
Howard_Beale's picture

Reserve requirements at 100% would do. In other words, they take deposits and loan them out and keep the spread. Won't make them rich but basically just serve as a public function. They can sell the loans to insurance companies, etc, and put it back on the asset side of the balance sheet and loan it out again, but no ponzi. That about sums it up.

Thu, 12/10/2009 - 17:35 | Link to Comment Miyagi_san
Miyagi_san's picture

everyone sell equities and buy PM's and then hunker down as a consumer...thats some ammo

Thu, 12/10/2009 - 17:47 | Link to Comment drbill
drbill's picture

Lead: the PM that protects your PM's

Thu, 12/10/2009 - 17:16 | Link to Comment TGracchus
TGracchus's picture

Really?  Raise a ruckus?  What would that be, exactly? I sure hope it's not another letter to Congress and protest in Washington, because it's clear enough to me that expecting change through use of the political process is an activity that satisfies Einstein's definition of Insanity.  I, and I suspect nearly all of your readers, are well aware of the problem, so alerting us to it and telling us to raise a ruckus without any concrete proposals is just plain annoying. Unless you have some direct action proposals to bring this corrupt system to an end, you can cease stating the obvious -- that we're totally screwed unless we "do something."  Brilliant.  In other news, rain is wet.

 

Gekko is right.  Bailouts will continue until the fiat dollar system is a smoldering ruins.  Some people are thinking of (legal and nonviolent) ways to make that happen that involve something a little more potent than taking a mark for writing letters, taking bus trips to D.C. and posting missives on the internets.  Here's one, it would be good if others joined in:

 

http://secessioplebis.blogspot.com/2009/11/trust-busting-by-people-for-p...

Thu, 12/10/2009 - 17:48 | Link to Comment gridlocked
gridlocked's picture

Curious what would happen if everyone pulled their deposits from one of these banks? Would they just prop it up and allow it to go on with no deposits?

Thu, 12/10/2009 - 17:58 | Link to Comment Anonymous
Thu, 12/10/2009 - 17:10 | Link to Comment Prophet of Wise
Prophet of Wise's picture

There is nothing new under the sun

Since the days Old Man Morgan directed the first 1907 stageshow and subsequent unparalleled personal propagrandized heroicity in single-handedly orchestrating the Genesis seed of the first U.S. [staged/planned/executed] bailout of the City of New York the ancient Ashkenazi tribe has mastered this most beautiful craft of acting out and repeating the script with such exact nicety and oramentation the famed patriarchs of western thespianism stand in awestruck marveldom. And ah, yes, the stage is set yes once again for the House of Morgan to repeat thy most worthy creation for most certainly it bears repeating...there is nothing new under the sun.

  

Thu, 12/10/2009 - 16:59 | Link to Comment Anonymous
Thu, 12/10/2009 - 23:25 | Link to Comment Anonymous
Thu, 12/10/2009 - 18:21 | Link to Comment illyia
illyia's picture

Here's where I start sounding like a broken record...

Stop using the TBTF institutions. I know...

But it would work.

It would... if people got mad enough.

Thu, 12/10/2009 - 16:38 | Link to Comment trav777
trav777's picture

Situation: hopeless.

They're listening to the guys who have the most education and biggest apparent credentials.

Problem is, those guys are fools.

Their fear is that credit collapse of debtmoney is upon us...banks peddle dollars, and if that product doesn't grow, they collapse.

Fed didn't want to have to print money but it's occurring to them that there is no way now to grow out of the compounding interest component.

Without the bailouts, these banks collapsed.  Too much bad shit in their conduits, too much leverage.  Real rates of return have collapsed because economic activity is less profitable now, EROI is declining.  So you make it up with leverage.

When things go south, though, it all implodes.  At some point, it will require infinite delta debt to create delta GDP.

We print or default, simple as that.  We're not going to have a zombie decade, we won't make it that far.  Growth-based economics is approaching an implosion point.

Japan showed us that monetary policy cannot reverse a real-world problem of excess capacity and inability to grow.

How the hell could anybody turn a profit these days on manufacturing anything?  It's hard to profit pumping oil or doing just about anything.  Labor glut, capacity glut, glut glut glut everywhere.

Thu, 12/10/2009 - 16:25 | Link to Comment Shameful
Shameful's picture

The problem is on this matter hey don't care.  They were overwhelmed with anti-bailout calls the first time and they did it anyway.  Short of showing up to the capital building with torches and pitchforks they will always bail out the TBTF at the expense of the taxpayers.

Thu, 12/10/2009 - 16:32 | Link to Comment ATG
ATG's picture

Big Bad Bank Bailouts the giant sucking sound of

today versus the Perot export of jobs to BRIC...

Thu, 12/10/2009 - 16:01 | Link to Comment Gordon_Gekko
Gordon_Gekko's picture

Actually, they'll succeed unless we completely reject the dollar. The bailouts will not die until the present unconstitutional form of the currency does.

Thu, 12/10/2009 - 18:48 | Link to Comment msorense
msorense's picture

Please help support it in the short term so the market can collapse.  Then I'll dump it with you in the medium term.

Thu, 12/10/2009 - 17:49 | Link to Comment drbill
drbill's picture

Actually, they have already succeeded. Its the inevitable failure of the fiat dollar that will finally stop them. Unfortunately there will be an awful lot of fallout when this happens.

Thu, 12/10/2009 - 14:55 | Link to Comment xamax
xamax's picture

Through taxes or inflation probably doesnt matter. They know the situation is hopeless (the "real" national debt, not only in the US) and therefor we will have a major schock one day (war, who knows what else).
It's only not fair and totally irresponsible for future generations. In this environment, one can easily buy stocks, it can only but go up until the final clash.

Thu, 12/10/2009 - 16:30 | Link to Comment ATG
ATG's picture

Speaking of War, Max Keiser played a YouTube of

a Defense Analyst on CNBC touting ATK,GD,NOC

and claiming 0 will support Israel taking on Iran

this coming March...

 

(Maybe some ZH sleuth can find it.)

 

 

Thu, 12/10/2009 - 18:59 | Link to Comment Anonymous
Thu, 12/10/2009 - 14:50 | Link to Comment Steak
Steak's picture

Quoth Geithner today: "History suggests that exiting prematurely from policies designed to contain a financial crisis can significantly prolong an economic downturn."

So by that logic, if our entire economy is a ponzi, it will remain in a perpetual state of financial crisis, and support measures for the banks will never be removed.

To paraphrase the title of this post, Giant Banks Are Trying to Make Bailouts Permanent. They'll Succeed

I am optomistic that Americans as a people can overcome any hardship when things really hit the fan, but I have zero faith that our government will do anything that favors citizens over the financial industry.

Thu, 12/10/2009 - 16:00 | Link to Comment ATG
ATG's picture

Zombie Banking.

Japan showed US the way...

Thu, 12/10/2009 - 15:07 | Link to Comment xamax
xamax's picture

"when things really hit the fan": didn't it happen already ?

USA is similar to a plan economy, where the government distributes money to anyone arguing he is system-relevant. This will end badly and of course nobody will be responsible !

 

Thu, 12/10/2009 - 15:07 | Link to Comment Andrei Vyshinsky
Andrei Vyshinsky's picture

"I am optomistic that Americans as a people can overcome any hardship when things really hit the fan, but I have zero faith that our government will do anything that favors citizens over the financial industry."

Might we amend the tail end of this remark to read, "but I have zero faith that our government will do anything that favors citizens over the financial industry, the arms or drug industries, or AIPAC"? That revision puts the problem more inclusivelt. I mean you wouldn't want to start trusting the Congress to approve its next anti-Iranian resolution with anything less than 95% yeas would you?

Thu, 12/10/2009 - 16:02 | Link to Comment ATG
ATG's picture

According to Sam Keen and Max Keiser, $11 T

could have paid off all credit card dent and home

mortgages instead of the $13 to $23 T committed

to prop up big bad banks. Effects may be felt for

three decades or worse, the end of money and

the beginning of barter...

 

 

Thu, 12/10/2009 - 14:20 | Link to Comment AnonymousMonetarist
AnonymousMonetarist's picture

Doubling down on a lost decade to avoid a lost generation...

Thu, 12/10/2009 - 15:59 | Link to Comment ATG
ATG's picture

Bingo.

Doesn't work in casinos and doesn't work at the

Fed and Congress either.

They gambled away the rent money and expected

Uncle to make it all better...

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