Banks Get Bailouts, We Get Shared Sacrifice (Marshall Auerback, New Deal 2.0)

[chill_wind]

Banks Get Bailouts, We Get Shared Sacrifice
Saturday, 11/13/2010 - 12:04 am by Marshall Auerback

It all started so innocently: deficit hawks wanted to restore their credibility in the face of the global financial crisis and the comprehensive discrediting of their ideology. They slowly emerged from their caves, trying to re-engage in the policy debate by appearing reasonable. They started saying that “now we should have deficits,” but soon (unspecified) “we will need surpluses” to “pay back the excesses.”

As time progressed, however, the comeback attempts became outrageous and outright distortion entered the picture. Figures such as Robert Rubin and Alan Greenspan (along with a whole host of Wall Street economists, whose employers had been large, albeit misdirected, beneficiaries of government largess) began to launch revisionist efforts to deny that fiscal policy had any positive impacts. Some went as far as asserting that government intervention actually worsened the recession by virtue of creating great “uncertainty”, which allegedly held back business investment.

This latter development has now gathered pace and found its fullest expression through the US National Commission on Fiscal Responsibility and Reform (an Orwellian title if ever there was one) established by President Obama. The Commission has proposed a $3.8 trillion deficit cutting plan that would trim Social Security and Medicare, reduce income-tax rates and eliminate tax breaks, including the mortgage-interest deduction. Yes, there are token cuts in Defense spending in the interests of “fairness”, but the cuts are heavily skewed toward middle class entitlements. (Which is a deceiving word because it implies that we’re just a bunch of weak supplicants, dependent on the graces of the government. Why don’t we call these programs “enablements”?) The priorities laid out by the Commission are truly symptomatic of the degeneracy of our governing class compared to the days of the Great Depression. Grand projects started then are still delivering value to communities and private business interests some 80 years after their completion.

The financial crisis delivered significant empirical blows to mainstream economics, which has consistently downplayed the effects of fiscal policy. Along with the usual ideological hatred of government spending (except, of course, when it favored their particular industries), most of the supporters of this commission continue to trot out the usual fantasies of excessive government spending “crowding out” the private sector. They also cited the perverse idea of “Ricardian equivalence“, which says the reason that the private sector is not spending is because it expects higher taxes in the future due to budget deficits, which will have to be paid back sometime — so they are saving up to pay those bills. And anybody who has the nerve to challenge their ludicrous assumptions is castigated as being “stridently opposed” to any reforms at all.

the rest: http://www.newdeal20.org/2010/11/13/banks-get-bailouts-we-get-shared-sacrifice-26885/

[dkf]

1. Actually we get a profit.

We at getting a profit on the tarp loans and the Federal Reserve loans to the banks have made it the most profitable US bank this year.

[janewin]

3. Nonsense

Eeven if we made any money from the TARP which i dont believe, at what cost is it to the citizens? We lend trillions of dollars through the treasury(TARP) and FED(back door bailout) at near 0% interest rates so that they can turn around to charge up to 30% cc rates and even sometimes lend it to the US govt for 3% interest rate.

[dkf]

4. Many are upset with their business practices period but the fact remains.

The program itself will be a net positive financial impact to the country. Also we haven't seen the fruits of Elizabeth Warren's efforts yet nor of the financial regulation bill so we don't know what the final outcome will be to the American people.

[janewin]

7. i think you are wrong on this

Rachel Maddow did a report on the TARP program a few months ago were she discovered that the program overall would only cost the US treasury 50 billion and this figure leaves out the interest on the 2yr dept that would have to be paid for who knows how long and even the few financial institution that are making money are doing it under the backs of the poor people who are forced into using credit cards and taking loans. So all in all, I say its a total failure, these banks should have all been allowed to fail. Obama was obviously lied to by the snake Paulson and Bernake(both RW scums) to support this bill so please lets not put the TARP failure or imagined success on Obama.

And please dont get me started with the trillions injected into the financial system by the Federal Reserve

[dkf]

9. Here are the latest numbers...

The Treasury said in an Oct. 5 report that it expects to lose about $17 billion on the separate $80 billion TARP payout to Detroit automakers General Motors and Chrysler.

The bank and insurance portion of the bailout, which includes $47.5 billion to New York-based American International Group, will probably earn $11 billion in the end, taking expected losses into account, according to Treasury estimates.

http://mobile.nj.com/advnj/pm_29224/contentdetail.htm;jsessionid=0999EA503218E3E87E4E1B312E84D740?contentguid=4Kh1OtM1

We may have had to borrow money to fund it, but when we inflated the economy by buying mortgage backed securities the Fed too made a lot of money

http://www.washingtonpost.com/wp-dyn/content/article/2010/01/11/AR2010011103892.html

In 2009 the Fed made $45 billion. That goes back to the General Treasury.

"As it happens, the Fed's earnings for the year will dwarf those of the large banks, easily topping the expected profits of Bank of America, Goldman Sachs and J.P. Morgan Chase combined.

Much of the higher earnings came about because of the Fed's aggressive program of buying bonds, aiming to push interest rates down across the economy and thus stimulate growth. By the end of 2009, the Fed owned $1.8 trillion in U.S. government debt and mortgage-related securities, up from $497 billion a year earlier. The interest income on those investments was a major source of Fed profits -- though that income comes with risks, as the central bank could lose money if it later sells those securities to reduce the money supply.

The Fed also made money on its emergency loans to banks and other firms and on special programs to prop up lending, such as one that supports credit cards, auto loans, and other consumer and business lending. Those programs impose interest and fees on participants, with the aim of ensuring that the Fed does not lose money."

[chill_wind]

13. And saddening to say, Elizabeth Warren

has effectively been sandbagged, for the indefinite time being.

Limits Emerge for a New Bureau Without a Director
By SEWELL CHAN
Published: September 30, 2010

http://www.nytimes.com/2010/10/01/business/01consumer.html?_r=3

"Mr. Wolin replied that “there is limited rule-writing authority, but it is constrained until such time as there is a confirmed director. But I think, in the meantime, there is plenty of work to be done to get these various disclosures ready.”

Later, Senator Bob Corker, Republican of Tennessee, pressed Mr. Wolin, saying: “I think what you’re stating today is there’s absolutely zero ability to make rules as it relates to consumer protection that relate to the financial system.”

Mr. Wolin hedged at first, saying that the Treasury can solicit ideas from the public and prepare the bureau for its inception on July 21, 2011 — the anniversary of Mr. Obama’s signing of the Wall Street overhaul that created the bureau.

Finally, Mr. Wolin acknowledged to the senators that “the authority to actually issue a rule that would bind private parties, for example, in the mortgage area is a tough one until such time as there is a confirmed director.”

[girl gone mad]

15. Not even close.

Tell me something. If you think these bailouts are going to be so profitable, and if there was so much money to be made, why didn't the private sector rush in to buy up the toxic trash? Why all the hushed up tax forgiveness schemes, the reclassification shuffle for AIG, the cover-ups, multi-trillion QEs, ZIRP scam, extend and pretend and mark-to-myth madness? If this is all so wonderful and profitable for the American taxpayers, what's with all of backroom dealing, obfuscation and slimy accounting tricks? Why do the deals we got look so damn bad by comparison with the deals Buffett made, for example? Why were we paying 100 cents on the dollar to counterparties who were willing to accept pennies on the dollar from private buyers?

Time for some honesty. The tales of financial alchemy that you're spinning aren't real.

[molly77]

11. We also do not get to know who got the TARP money

That doesn't seem democratic. The banks get bailed out while they illegally foreclose on homeowners. That seems fascist to me.

[truedelphi]

5. Really? I am unaware of that.

I know that is how the news media is spinning it - but if you examine the stituation a bit more carefully, you discover that there is Eleven Trillion and Counting amount of money received by and now sitting in the coffers of the Big Banks and FInancial Institutions.

Are you aware that often this money that is paid back has that accomplished through a mechanism of tax offsets? In other words, pay us back the money and you will get a tax credit! Boy, wouldn't it be nice if most here could get such a deal on their credit card write offs?

Yeah, yeah a ten to hundred billion bucks has been paid back here and ther, but most of the money is still unaccounted for.

And the "Quantitative easing" is just another word for our government buying up stuff that will be more money owed to Goldman Sachs.

Could that have something to do with the current head of the New York Federal Reserve being an employee of GOldman Sachs until just a before his appointment?

[janewin]

8. Toxic assets

Don't forget repayment thru the Fed buying Toxic assets. Anyone who really thinks the govt will make any money of this should take a sec and check out my beach front property in Omaha

[truedelphi]

10. Sad thing is, and another thing most folks do not know,

The Irish Government Bailed out Their Too Big Too Fail Organizations just like we did.

With one exception - there was an important provision in the Bailout. The money that went to those banks that had mortgages with homeowners involved, had to apply the money to the cost of those toxic assets and let the homeowners alone! (In the USA, what happened is the money went to the toxic assets like the CDS, and other derivatives.)

Apparently due to the history in Ireland, it was understood that people might not take kindly to being forced to Bail Out Banks unless there was some consideration for them. The Irish do have a history of taking out officials who don't work for the People.

[chill_wind]

6. A nice piece of Washington accounting fiction

when you factor in the big picture.

Fannie Mae, Freddie Mac bailout cost is likely to rise to $154 billion, agency projects

By Zachary A. Goldfarb
Washington Post Staff Writer
Friday, October 22, 2010; 12:13 AM

http://www.washingtonpost.com/wp-dyn/content/article/2010/10/21/AR2010102101941.html?sid=ST2010102106905

And taxpayers will take it in the shorts.


Repayment unlikely

"In any event, it is becoming increasingly clear that the rescue of Fannie and Freddie will be the most expensive part of the government's response to the financial crisis. While many banks and even American International Group have repaid or are working to reimburse the government, the likelihood of Fannie and Freddie doing so is slim, their regulator said.

The sustained hemorrhaging at Fannie and Freddie comes in sharp contrast to the celebratory tone of the Obama administration recently when discussing the bank rescue known as the Troubled Assets Relief Program. "

[OHdem10]

2. Exactly. This is why in Europe you are seeing the large Demonstrations

and Strikes. It is reported here. They resent raising their
Retirement Age. (France) In UK (Resent raising college tuition.
Greece and SPain, likewise. A little deeper look finds they
are bitterly resentful of Banks and Bond Houses who appear
to have greased by easily leaving the citizens to bear the
heaviest burden.

[KoKo]

12. One would hope that DU'ers would read the Link from the OP...before

they pass judgement...wouldn't one? :eyes:

[chill_wind]

14. Thanks KoKo. He does have quite a bit more to say

and somewhere in the middle, a rather perfect metaphor for it all:

"The deteriorating position of most American families has been exacerbated by the failure of fiscal policy to ensure there was enough spending to support their jobs and, hence, generate increased revenues (which would REDUCE the budget deficit). There are no consequences for the people who helped drive us into the ditch that the President loves to talk about. In fact, to extend the President’s metaphor, the very car that veered off into the ditch has run over the people trying to climb out of it. Those victims, in turn, are being blamed for having dug the ditch in the first place."

[eridani]

16. "Uncertainty" my ass

Businesses are not investing because they are extremely certain that there isn't any fucking DEMAND out there that would justify it.