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Mendacious Commercials Against Financial Regulation

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Annie Lowrey over at The Washington Independent has a nice post deconstructing  the latest series of advertisments attacking the financial regulation bill now being debated in the Senate.

I admit I hadn’t seen this lovely bit of propaganda until she drew my attention to it, and it’s interesting to examine the claims it makes. The first rule of propaganda is to attribute to your enemy your own actions and intentions. Thus, the commercial rather cleverly accuses the Senate of setting up an apparatus for “unlimited bailout authority”, and, astoundingly, claims that “Goldman Sachs is in favor of the bill”.

Neither of these statements is true, of course, but the implications go deeper than that. As TPM revealed earlier this week, the sponsors of the ad, a front-organization calling themselves “Stop Too Big to Fail”, are funded entirely by corporate dollars, including, yes, Goldman Sachs. This attempt to dust up public anger against the financial reform bill indicates Wall Street’s fear of it, and their willingness to tell any lie in order to see that the reform bill doesn’t pass.

Not that they really have that much to worry about. As George Washington remarks, the reform bill currently being debated is “All Holes and No Cheese“, noting that:

Dodd’s bill:

What it will do, however, is set up new protections for consumers, specifically to protect them from predatory lending practices, overdraft fees, byzantine contracts that require a Ph.D to understand, etc. The bill will also (hopefully) enact some barriers to the trade of over-the-counter (unregulated) derivatives, those delightful instruments that got us into this crisis.

As with the health care bill, I feel really ambivalent about this.

On one hand, the Dodd bill does almost nothing to prevent too-big-to-fail, it proposes some watered-down reform on derivatives trading, it doesn’t reduce the size or power of our mega-conglomerate banks, it doesn’t reinstate Glass-Stegall, and it does nothing to rein in the frankly absurd amounts of cash the bank executives make, whether or not they happen to crash the economy

On the other hand, this bill does provide some new consumer protection services, it bans proprietary trading (whatever that is), and it does create a new regulatory body whose specific charge is to watch over our mega-banks (as opposed to the SEC, which has a universal mandate).

Is this good enough? Can we do better? With the flood of Wall Street money flowing into campaign coffers, and with the November election only 6 months away, I’m inclined to say no. Maybe we should take what we can get. And keeping in mind that, unlike the health-care bill which had full industry support, the Dodd bill is being opposed by nearly every major bank, maybe it isn’t so bad after all. If the banks are against it, there must be something good inside this bill.

Update: Also see Nomi Prins’ article in Alternet entitled “Ten Ways The Dodd Bill is Failing on Financial Reform“:

It won’t constrain the Fed’s future bailout operations. It appears to limit the Fed’s ability to lend money freely to firms in trouble by “allowing” its system-wide support only for healthy institutions or systemically important market utilities. But what’s to stop the Fed from designating any company a “systemically important market utility”? That was basically the rationale behind the AIG bailout.

Update II: It’s also important to keep in mind that Chris Dodd, the bill’s sponsor, is heavily funded by some of the most odious Wall Street titans, including Citigroup (who gave him $110,000 this cycle), AIG ($87,000), Merrill Lynch ($61,650), Morgan Stanley ($44,000), and JP Morgan ($37,000). Hooray for transparency!

Written by pavanvan

April 29, 2010 at 1:00 pm

Britain Grapples With Debt of Greek Proportions

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The Times has a pretty strong piece in today’s issue about Britain’s massive debt problems. Yet more evidence that the “Greek Problem” isn’t limited to Greece alone. The whole European Union and most of its satellite economies are probably in for a rough decade:

As for the British government, it has been able to finance a budget deficit of 12.5 percent of G.D.P. — equal to Greece’s — at an interest rate more than two full percentage points lower only because the Bank of England bought the majority of the bonds it issued last year.

“It’s not just ‘basket cases’ like Greece that can be considered candidates for sovereign crises,” said Simon White of Variant Perception, a research house in London that caters to hedge funds and wealthy individuals. “Gilts and sterling will continue to come under pressure as scrutiny of the U.K. fiscal situation intensifies.”

Now, unlike the United States, other countries’ deficits actually mean something. They aren’t allowed to go around printing as much money as they want, running absurd amounts of debt, and forcing everyone to except their currency at the barrel of a gun. Running budget-busting deficits isn’t just something they can laugh off, like we can here in America – over a long enough time scale, those deficits can make a country’s currency worthless.

It’s tough to see where this will end. The whole EU and attached economies are vulnerable to this “contagion”, which, I cannot stress enough, has a lot to do with Wall Street’s reckless bets during the aughts. If we were living in a fair world, these Wall Street firms would pay reparations to the affected countries for essentially destroying their economies. As it is, it looks as though we’re going to have to watch the EU go down in flames before anyone does anything.

Then, likely, we’ll see some backdoor deals, a few hurried conferences, and the US Government will come out with a new TARP program, this time for Europe. Washington has always had a flair for publicity – maybe they’ll call it a “second Marshall Plan”. It’s inconceivable that the US would allow its most favored “allies” to go down without assistance. And such a move would likely have incidental benefits – namely, bringing the EU firmly under our political control.

Sure, the American taxpayer will eventually have to foot the bill, but who ever cared about that?

Written by pavanvan

March 3, 2010 at 4:00 pm

JP Morgan Says California A “Bigger Risk” Than Greece

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The London Telegraph has the scoop:

Mr Dimon told investors at the Wall Street bank’s annual meeting that “there could be contagion” if a state the size of California, the biggest of the United States, had problems making debt repayments. “Greece itself would not be an issue for this company, nor would any other country,” said Mr Dimon. “We don’t really foresee the European Union coming apart.” The senior banker said that JP Morgan Chase and other US rivals are largely immune from the European debt crisis, as the risks have largely been hedged.

California however poses more of a risk, given the state’s $20bn (£13.1bn) budget deficit, which Governor Arnold Schwarzenegger is desperately trying to reduce.

Written by pavanvan

March 1, 2010 at 5:55 pm

Wall Street Bonuses Increase 17%: A Banker’s Reaction

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A little part of me dies when I read stories like this. I mean, I know Wall Street “owns” Congress, as Rep. Dick Durbin was kind enough to inform us, and so the chances of any meaningful punitive action towards them are virtually nil, but still these developments never fail to outrage.

And through it all, one cannot help but wonder: What exactly do these bankers do to deserve their multi-million dollar salaries? People tell me they “work hard”, sure, but then so does a ditch-digger outside Kuala Lumpur, and no one pays him a million dollars. It isn’t even as though their work helps anyone, or at least not objectively. I’ve heard all manner of explanations that “the economy stops without Wall Street” – as though it hadn’t done that with Wall Street’s help.

The part most perplexing to me is how these bankers seem immune to shame for their theft. Surely they read the newspapers, every one of which carries countless stories of everyday citizens who had their lives turned upside-down by this crisis of their making. The Times had a particularly good one the other day about how millions face years of unemployment because of the crisis. The article is entitled “The New Poor“. Several of the people they interviewed had their savings wiped out and are now on the verge of homelessness. I mean, don’t they read articles like that and feel bad?

Apparently not. I recently spoke with a high-school buddy of mine (well, maybe buddy is the wrong word) who, after an economics degree at Duke, found a comfortable position at a prominent Wall Street firm.

“Yeah, I’m a fat cat”, he said, with an unmistakable note of pride.

I wanted to know how he felt about the new poor, particularly as the company to which he attached himself had a direct hand in causing the financial crisis.

He shrugged. “Those people deserved it. They should have been smarter with their money.”

I was appalled. “But your company sold them predatory loans! I mean, you guys willfully misled them.”

“Look”, he countered, “No one put a gun to their heads and forced them to trust us. They’re idiots. If they were smarter, they would have gone to school, gotten business degrees, and been in a position to know what they’re talking about. You play with fire, you get burned.”

“But then what’s the point of your business? Aren’t you in the business of handling the money of people who lack the knowledge to handle it themselves?”

He laughed mirthlessly. A cold look crept into his eyes. “Are you stupid or something? We’re in the business of making money. That’s it. Sometimes we make money by making other people money – sometimes we make money when other people lose money. That’s the bottom line.”

I was at a loss for words. “How can you be so callous?” I managed to stammer.

“Stop it with this gay shit. Like its my responsibility to worry about every poor loser who comes through my door. I’m only responsible for myself. Period. I don’t go around telling people to watch my back – I watch my own. They should do the same. I’m fucking sick of you assholes coming up to me and whining about all these idiots who lost money during the crash. Those retards deserved it. I looked out for myself – my company looked out for itself – and we’re making money. Those idiots didn’t look out for themselves. They expected someone else to do it. And look what happened.”

Nearly defeated, I asked, “So the banks have no responsibility for all these people who are now financially ruined?”

“If they want to blame someone, they should take a long, hard look in the mirror. These dickheads were happy enough with us when we were making them 15% per year, but now that things go sour they look for someone to blame. It’s their own damn fault. What, they think we’re in business just to help them out? Fucking retards.”

Conscious that I was beginning to sound like a broken record, I persisted. I just couldn’t believe what I was hearing.

“Well, you guys were ready enough to take the government bailouts. I mean, how can you justify that?”

He scowled. “Look, you have no idea what the fuck you’re talking about. What did you study in undergrad? Engineering? Leave this shit to the experts, troll. If the government allowed the banks to fail, the economy would have crashed. Done. The world would have been over. And all those bullshit sob stories you’re trying to sell me, they would have been 100 times worse. Anyway, we’re paying you assholes back, so I don’t see what you’re crying about.”

He left me with a bit of advice. “You really need to pull your head out of your ass. All this crying over others isn’t gonna get you anywhere. You’re what – 22? How much money do you make?”

I told him. He burst into laughter.

“See, that’s what I’m talking about! You’re gonna grow up to be one of these losers we take advantage of, if you aren’t careful. Here, what you should do – read some Ayn Rand. She’ll tell you all you need to know.”

And that, ladies and gentlemen, is the mentality of Wall Street, that collection of companies without whom we cannot survive.

Written by pavanvan

February 24, 2010 at 12:37 pm

Are US Taxpayers Bailing Out Greece?

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(c/o The Daily Digest)

Ron Paul makes sense (on this, at least):

Is it possible that our Federal Reserve has had some hand in bailing out Greece?  The fact is, we don’t know, and current laws exempt agreements between the Fed and foreign central banks from disclosure or audit.

Greece is only the latest in a series of countries that have faced this type of crisis in recent memory.  Not too long ago the same types of fears were mounting about Dubai, and before that, Iceland.  Several other countries (Spain, Portugal, Ireland, Latvia) are approaching crisis levels with public debt as well.  Many have strong ties to Goldman Sachs and the case could easily be made that default could have serious implications for big US banking cartels.  Considering the ties between the Fed and these big banks, it is not outlandish to wonder if the US taxpayer is secretly bailing out the entire world, country by country, even as our real unemployment tops 20 percent.  Unless laws are changed to allow a complete and meaningful audit of the Federal Reserve, including its agreements with foreign central banks, we might never know if this is occurring or not.

The point is, we don’t know. In fact, we know very little about what the Federal Reserve does with the trillions and trillions of dollars in cash that it’s empowered to print and distribute as it sees fit. I remember a couple months ago people were seriously discussing whether or not to audit the Fed. This never happened, and after a couple weeks people just stopped paying attention and turned their gaze to the next shiny object on the horizon.

Without a meaningful audit of the Federal Reserve, we will never know where our money goes. The Fed, as we all know, as been bestowed massive new powers as a result of this crisis (which they helped cause), and this makes an audit all the more important. I guess I would suggest you phone your congressperson about this, but we all know how much good that’ll do.

Written by pavanvan

February 21, 2010 at 11:40 am

AIG Deja Vu

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Well, it’s that time of year again: the snow has fallen, the air bitter cold, and AIG decides to award its criminal executives hundreds of millions of dollars in “bonuses”. But wait, haven’t we seen this before? I seem to remember a huge uproar about this sometime last year… hang on – let me check the interwebs…

Okay I found it! It’s a March 15, 2009 Times article entitled “AIG Planning Huge Bonuses after $170 Billion Bailout.” Yeah, now I remember. It was really a big deal back then – there were hearings, emotional speeches, widely publicized resignations – it even came out that AIG owed Goldman Sachs a lot of money, and that much of the AIG bailout really went to GS.  In the end, AIG said it was sorry and it would never do it again.

Well, I guess they must think we’re stupid or something, because it’s a year later and they’re doing the exact same thing again. Okay well, maybe not the exact same thing – last years’ bonuses added up to $170 million – this year they’re cutting back and only handing out a paltry $100 million.

But lets look at some of the similarities:

March, 2009:

The senior government official, who was not authorized to speak on the record, said the administration was outraged. “It is unacceptable for Wall Street firms receiving government assistance to hand out million-dollar bonuses, while hard-working Americans bear the burden of this economic crisis,” the official said.

February, 2010:

“A.I.G. has taxpayers over a barrel,” said Senator Charles E. Grassley, an Iowa Republican, in a statement on Tuesday night. “The Obama administration has been outmaneuvered. And the closed-door negotiations just add to the skepticism that the taxpayers will ever get the upper hand.”

March, 2009:

The second group of bonuses covers some 2008 retention payments from contracts entered into before government involvement in A.I.G. Indeed, in his letter to Mr. Geithner, Mr. Liddy wrote that he had shown the details of the $450 million bonus pool to outside lawyers and been told that A.I.G. had no choice but to follow through with the payment schedule.

February, 2010:

The holdouts seem determined to make A.I.G. pay the full contractual amounts, knowing they can make a reasonably good case under law, because A.I.G.’s own lawyers have previously issued an opinion that the contracts are binding. If they succeed, A.I.G. would have to pay them more money at some point in the future, and might even have to pay penalties for breaking its employment contracts.

Huh.  Well, at least they’ve paid back some of the taxpayer money, right?

March, 2009:

The American International Group, which has received more than $170 billion in taxpayer bailout money from the Treasury and Federal Reserve…

February, 2010:

The government has extended roughly $182 billion in total to A.I.G. It is selling some of its units to help repay the debt.

D’oh!

Written by pavanvan

February 3, 2010 at 10:04 am

AIG Timeline

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Bloomberg has a fantastic timeline of the fortunes and despairs our favorite International Group has suffered and celebrated over the past two years. This will be very useful for anyone still confused about how AIG ended up with trillions of taxpayer dollars (read: everyone)

Written by pavanvan

January 23, 2010 at 11:39 am