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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 | 159697 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 | 159525 Andrei Vyshinsky
Thu, 12/10/2009 - 18:07 | 159506 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 | 159499 Anonymous
Anonymous's picture

Fuck the banks and their FIAT trash!!

Put your savings into precious metals, and stop feeding the BEAST, or you are part of the problem, not part of the solution!

Thu, 12/10/2009 - 17:39 | 159466 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 | 159673 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 | 159459 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 | 159475 drbill
drbill's picture

Lead: the PM that protects your PM's

Thu, 12/10/2009 - 17:16 | 159435 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 | 159476 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 | 159491 Anonymous
Anonymous's picture

THAT is the only action that would work!!

PEOPLE!!!

We must collectively act to pull all of our assets from these criminal banks.

CHOOSE to put your money in a small, responsible bank or credit union that DESERVES and has EARNED your business and trust.

The longer we allow banks to abuse us like they are without consequence, THE WORSE it will get.

If you have your money with Bank of America and continue to BITCH AND MOAN about these criminals, you have NO BASIS for an argument!!

ACT TODAY to make a difference!!

Thu, 12/10/2009 - 17:10 | 159427 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 | 159415 Anonymous
Anonymous's picture

Really? Raise a ruckus? What would that be, exactly? I sure hope it's not another plea for us to write our 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 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 - 23:25 | 159767 Anonymous
Anonymous's picture

What we need to do is start vetting new candidates to win in 2010. This is not happening at the moment. There are no serious contenders for the opening slots.

Thu, 12/10/2009 - 18:21 | 159521 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 | 159369 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 | 159343 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 | 159358 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 | 159314 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 | 159546 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 | 159477 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 | 159244 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 | 159352 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 | 159559 Anonymous
Anonymous's picture

The last date that the conspiracy theorists were wetting their pants about was October. That didn't happen. I'm glad I didn't waste money on any Geiger counters or N95 masks then.

Thu, 12/10/2009 - 14:50 | 159237 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 | 159311 ATG
ATG's picture

Zombie Banking.

Japan showed US the way...

Thu, 12/10/2009 - 15:07 | 159265 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 | 159263 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 | 159315 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 | 159162 AnonymousMonetarist
AnonymousMonetarist's picture

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

Thu, 12/10/2009 - 15:59 | 159309 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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