This page has been archived and commenting is disabled.
Is Obama's Populist Rage Against Big Banks Valid?
From The Daily Capitalist
President Obama used his bully pulpit on Thursday to chastise banks and bankers while announcing a punitive tax on them to assuage an angry populace.
To me it seemed rather "yesterday" when we're all taking in the magnitude of the earthquake in Haiti. That's another subject. But I hope you all will donate money to institutions that are helping the rescue efforts. We like Direct Relief International which sends free medical and emergency supplies to aid poor countries and have an excellent disaster response team. They have a long history in aiding Haiti. Please join me in supporting them.
Back to Barack. Is his rage valid? Should we be angry at banks for making lots of money and then paying out big bonuses?
This is not as easy as it sounds. In a perfect world, who cares? They should be able to pay whatever they want to their employees as long as the Board of Directors and the shareholders agree. If the shareholders don't like it, they can sell their stock. This would be the classic free market approach.
The other side of the argument is that this isn't a free market, it's a highly regulated market, these institutions are creatures of the federal government, and the banks which took TARP money open themselves up to criticism and penalty.
This gets down to some basic economic laws: the laws of unintended consequences, moral hazard, creative destruction, market competition, and the fatal flaw of fractional reserve banking. And a few others.
All these economic laws were ignored during the Panic of 2008. I'm not talking about the market crash, I'm talking about when Hank Paulson and Ben Bernanke panicked and bailed out their Wall Street buddies. They believed that they saved the world because their friends were too big to fail.
They were wrong. Yes, it is true that AIG, Citigroup, maybe BofA, Merrill, and others would have failed without government bailouts. That would have been good for the country. These institutions took big risks knowing that they would be bailed out because of who they were. I'm not saying they planned it that way, but it had to be in the back of their minds.
No one is too big to fail.
Bailouts rewards bad behavior and unfairly burden taxpayers. Which means that these institutions will do it again. That is, they will continue to take improper risks without full appreciation of the consequences. If they had failed, their business methods would go the way of the pterodactyl. Risk evaluation methods would change the entire banking system. Risk evaluation would change in the insurance industry if AIG had been allowed to fail because their actuaries would realize that they were gambling with credit default swaps, not insuring insurable risks. I'm sure AIG had grasped the concept of potential bank bailouts of the banks they guaranteed.
What would have happened if these large institutions had been allowed to fail? Credit would have dried up, many companies seeking credit would have failed, investment funds would have taken huge losses, housing would have collapsed, and these too big to fail institutions would have been put in receivership or Chapter 11 bankruptcy.
But as we all know, these things did happen after the bailout, so what was the point? You say that we avoided another Great Depression? Not at all. Depressions are caused by government interference in the economy by disrupting the healing process that occurs after every crash. The Great Depression was caused by Hoover and FDR.
What would have happened without bailouts is that we would have recovered by now, or at least be well on our way to recovery. I will concede that things would have been temporarily, cosmetically worse without the bailout. But so what: the point is that things are worse with the bailout because essentially failed or bankrupt banks and businesses are kept alive on life support thus substantially delaying any recovery. We won't recover until the balance sheets of businesses and financial institutions in this country are cleared up and repaired.
Let me say that I am mad at these financial institutions. I am mad at them for being dopes by failing to properly evaluate risk. I am mad at them for taking TARP money. I am mad at them for their false public hubris. I am mad at them for being part of the Washington-Wall Street Economic Complex. I am mad at them for their "stop me before I kill again" political stance. I am mad at them for failing to change their business models.
I am mad at the federal government for setting the stage which created the economic crisis. I am mad at them for bailing out their buddies. I am mad at them for their Keynesian stimulus. I am mad at them for failing to bring true reform. I am mad at them for their hypocrisy and fake outrage. I am mad at them for ... well, for most things.
Yes, I am mad at the big banks and the investment banks for the big payday. Without taxpayer support, their profit structure would be much lower. We would see a different Wall Street.
What we need is to stop doing what we keep doing cycle after cycle. No bailouts.
»
- advertisements -
JR - I completely agree with you. Whilst I feel frustrated about the bankers/Wall St. etc. it really is that they are enjoying a romp in a game that has been so carefully and studiously prepared for them by the governing elites of America. As you say a coup d'etat pure and simple.
Of course you knew from the get-go that he was posturing. Of what else is this lying sack of crap capable. This piece by Alan Nasser, Professor Emeritus of Political Economy at Evergreen State College, gets right to the heart of the nauseating insincerity so characteristic of that excuse for a leader, Barak Obama, and says it all about this bank tax ruse:
http://www.counterpunch.org/nasser01152010.html
"Recoup every penny" of the $700 billion TARP with a tax package aimed at generating $90 billion? What about the $23 trillion Barofski estimates the bailout will eventually cost us and the $12 trillion in losses to the wealth of working people this crisis has caused? Read Nassar's piece. It's outstanding.
Go Geoducks!
Powerful! A must read! Thanks! I liked, “None of Obama’s faux outrage has been as disingenuous as his Wednesday announcement that he will finally respond sympathetically to the public’s deep resentment of the administration’s tolerance -and therefore encouragement- of the bad guys’ looting of the public treasury.”
Yes! And why does Obama assure his constituents that he will “recoup every last penny for American taxpayers”--$90 billion, ahem--when that money will go to the Treasury, i.e., Geithner, i.e., back to the bankers?
I’ll bet Obama wouldn’t be hitting them with a punitive tax if they were a bunch of Thai ladyboys.
How 'bout a spittake warning next time?
A drunken driver hits your family disabling them to where they can no longer work and putting them out of their home to pay the bills. Now the same the guy who hit them you find out won the lotto and claims "thats fortunate now I can get a lawyer to get out of that lawsuit" yet offers no help to you or your family. Now tell your family now that everything is OK.
Multiply that times millions and and that's how many want some serious eye for eye payback and justly so.
Hey kidz! Follow da munney!
Donor dependency looks somewhat inflationary, no? Even non-profits think going into the red is okay these days. Look at that fundraising efficiency - private support? Thanks for the shoutout O - we'll be at 7000% fundraising efficiency for 2010!
http://www.forbes.com/lists/2009/14/charity-09_Direct-Relief-Internation...
Don't hate the messenger, hate the fiat philanthropist. And the banksterz? Those guys are the all-time for-profit fundraisers - swing for the fences!
---
Separately:
Good stuff. Some coward already one-starred you by imagining the components of your current average.
January 14, 2010: The Word - Honor Bound
Your honor was so precious to the banks that they bundled it with other people's honor and sold it to Wall Street honor speculators
http://tinyurl.com/ykz6ozv
Love Colbert!
Ron Paul Powerful Speech - A Call for Revolution?
Slavery sold as liberty. Socialism to save capitalism. A psychotic nation. Exuberant taxation. Epidemic of cronyism. 700 military basis all over the world. Tortures of 21st century. We have forgatten what made America great. Revolutionary changes are needed and forseen. Is Ron Paul the ONLY honest man in American's politics??
http://tinyurl.com/yj4wr3w
What makes him such a warm center that honest people flock is his relentless crusade of integrity. He is still relatively unknown in the big picture. Most Americans can't even remember who Rudy Giuliani is. What a sad state of affairs we endure in that such scathing comments will not even show up on the radar for 99.9% of Americans. Maybe I'm exagerrating - maybe more people are paying attention to him. Maybe the Tea Party will see the need to rally for him as a Republican because you can't be divided when it comes to beating the free shit! party. \
What the hell am I talking about? More elections at the Federal level is consent to remain governed - End the Fed.
A lot of money and influence is directed at keeping people like Ron Paul out of the mainstream:
http://www.adl.org/special_reports/rage-grows-in-America/default.asp
Tax protesters or others who protest Obama and the government are now considered radical anti-Semitic racists.
"A lot of money and influence is directed at keeping people like Ron Paul out of the mainstream..."
Josef Stalin once said, "It is enough that the people know there was an election. The people who cast the votes decide nothing. The people who count the votes decide everything".
And this precisely the dilema faced by third party and independent candidacies for the presidency in this country. The Regime parties preside over the election process, making it so daunting that from the point of view of those on the outside looking in, it has all the marks of an election in Romania in, say, 1948. I'd have to say this about Paul, however: No one was a bigger obstacle to his success last time than he was. I mean when you refuse to launch a principled independent candidacy when you have the support and the money, preferring instead as he did to keep your very comfortable Republican House seat instead, you're a twenty-four carat phoney.
otlichno!
Quite good comments.
I would like to add two of my own observations:
1. There are really not much differences between two major political parties (Democrats and Republicans). The difference is that the both parties represent various segments of the same American ruling elite who usually contribute to & support the both parties.
2. There are many reasons for the present financial disaster. In summary, politicians & US government of both major political parties greatly endangered well-being of the US economy and civil society tranquility making the overall situation quite unstable. The tragedy is that the ruling elite is too arrogant and incompetent to understand the seriousness of the present situation.