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Secret Banking Cabal Emerges From AIG Shadows: David Reilly -
The idea of secret banking cabals that control the country and global economy are a given among conspiracy theorists who stockpile ammo, bottled water and peanut butter. After this week’s congressional hearing into the bailout of American International Group Inc., you have to wonder if those folks are crazy after all.
banking  reform  federal-reserve  government  bailout  aig 
january 2010 by tsuomela
Can Citigroup Carry Its Own Weight? - Series -
OVER the past 80 years, the United States government has engineered not one, not two, not three, but at least four rescues of the institution now known as Citigroup.
banking  government  bailout  regulation  wall-street  free-markets 
november 2009 by tsuomela
The "Disaster Stage" of U.S. Financialization | TPMCafe
This could be a powerful framework. All of these critiques have merit, and ideally they might converge as earlier indictments of elite and governmental abuse did during the Progressive and New Deal eras. But I have to return to whether the public will ever be given full information on the fatal magnitude of financialization, who was responsible, and how it failed and crashed in 2007-2009. So far, political and media discussion has been so minimal that the early 21st century American electorate has much less readily available information on what took place than did the electorates of those earlier reform eras.
recession  information  media  journalism  economics  politics  finance  corruption  crisis  government  bailout  wall-street 
october 2009 by tsuomela
SSRN-Bailouts: An Essay on Conflicts of Interest and Ethics When Government Pays the Tab by Richard Painter
This essay, a precursor for a book project on the same topic, addresses ethics problems for government officials who orchestrate bailouts of private companies...This essay concludes that government ethics law in its current state is not up to the task and that the United States is not prepared to implement bailouts in a manner that will instill public confidence. Although these problems could be alleviated through stricter ethics rules or a more systematized approach to bailouts, most solutions would be more costly than the problems they attempt to solve. Bailouts thus impose a substantial burden on government ethics that may be impossible to remove, in addition to the economic cost bailouts impose on taxpayers. Designing a bailout free economy may be the only acceptable alternative.
ethics  government  bailout  wall-street  politics 
october 2009 by tsuomela
It’s Hard Being a Bear (Part Five): Rescued? | Steve Keen's Debtwatch
This “multiplier effect” will only work if American families and businesses are willing to take on yet more debt: “a dollar of capital in a bank can actually result in eight or ten dollars of loans”.
So the only way the roughly US$1 trillion of money that the Federal Reserve has injected into the banks will result in additional spending is if American families and businesses take out another US$8-10 trillion in loans.
What are the odds that this will happen, when they already owe more than they have ever owed in the history of America?
economics  stimulus  multiplier  debt  leverage  bailout  recession  credit  money  monetary-policy 
september 2009 by tsuomela
slacktivist: George Bailey
That's more or less the same situation we find in the ending of It's a Wonderful Life.

That $8,000 that Uncle Billy "lost" was pocketed by Old Man Potter himself. He stole from his depositor. And he got away with it. The missing money was replaced, but not by Potter -- it was cobbled together out of the pockets of the working people of Bedford Falls. ("Do you know how long it takes a working community to save $8,000?")

Potter was never punished and the deficit for the money he stole, and kept, was paid for by a communal bailout.
economics  culture  movie  movie(ItsAWondefulLife)  metaphor  bailout 
may 2009 by tsuomela | Willem Buiter's Maverecon | Ruminations on banking
As a result I now expect a clean bill of health for the banks from the Stress Tests. For most banks this will turn out to be incorrect before the end of the year. At that point, the de facto insolvency of much of the US border-crossing banking system will become so self-evident, that even the joint and several obfuscation of banks and Treasury will be unable to deny the obvious.
economics  banking  crisis  stress-test  bailout  solvency 
april 2009 by tsuomela
Information Arbitrage: The US Government: Over-engineering for Under-performance
And recent bank earnings are only one shining example of why we are now locked into a painful, protracted process of false hope, failure and rebirth, when we could have chosen quick, deep pain, and transitioned to real hope and rebirth in a much shorter time-frame. But the US Government does not believe the US citizen can withstand such pain
economics  crisis  bailout  government  failure  gloom-and-doom  politics 
april 2009 by tsuomela
Hussman Funds - Weekly Market Comment: Green Shoots over Thin Ice - April 13, 2009
Last year, I didn't think it was conceivable that policy-makers would attempt to address this problem by making lenders whole with public funds. This is an ethical abomination, putting the public in the position of absorbing the losses that should properly be borne by those who provided capital to these institutions. It is not sustainable. What it does is place the public in the position of losing first, but it will not, and cannot prevent the ultimate failure of the debt – for the simple reason that without restructuring, the debt can't be serviced.
economics  crisis  bailout  future  2009  wall-street  debt 
april 2009 by tsuomela
Stumbling and Mumbling: Miles from Marx
critical of G20 protests...they “served a therapeutic rather than a political function.” ... they were irrelevant to ordinary people.
I agree. What they showed for me, though, is just how very far we are from any Marxist notion of revolution
liberal  leftism  marxism  economics  bailout  alternative  politics 
april 2009 by tsuomela | Willem Buiter's Maverecon | Useless finance, harmful finance and useful finance
The endless churning of contingent claims, including derivatives, when the purchaser has no identifiable insurable interest, turns financial intermediation into a market-mediated betting shop. Then the betting slips become bearer securities and are themselves traded, either OTC or on organised exchanges, and the derivative transactions volumes expand to dwarf the transactions in the markets for the underlying financial claims (let alone the markets for the underlying real resources). At that point, the betting tip of the financial tail of the real economy dog does all the wagging. It does not create value but redistributes it in a way that consumes real resources and exposes the real economy to unnecessary risk. It’s time to tame the tiger.
finance  financial-services  cds  investment  banking  reform  bailout  regulation  speculation 
april 2009 by tsuomela
Jeffrey Sachs: The Geithner-Summers Plan is Even Worse Than We Thought
Two weeks ago, I posted an article showing how the Geithner-Summers banking plan could potentially and unnecessarily transfer hundreds of billions of dollars of wealth from taxpayers to banks... Insiders can easily game the system created by Geithner and Summers to cost up to a trillion dollars or more to the taxpayers.
economics  banking  bailout  regulatory-capture  insider  gaming-the-system  gloom-and-doom 
april 2009 by tsuomela
AIG: Before CDS, There Was Reinsurance | The Big Picture
Some inflammatory suggestions about fraudulent use of "side letters" in the re-insurance industry. Where there's a will to bend the rules there is a way to make money.
accounting  aig  bailout  cds  fraud  business  insurance  banking  financial-engineering  gloom-and-doom  wheels-within-wheels  rotten-to-the-core 
april 2009 by tsuomela
The Geithnerconomy and the New Cold War - Umair Haque -
The Geithner plan is a financial coup d'etat. The Geithner plan is the most radical — and radically toxic — cure for a financial disease in recent history. From an organizational point of view, it is nothing short of revolution: a financial coup d'etat.
economics  banking  bailout  ppip 
march 2009 by tsuomela
The Becker-Posner Blog: The Government's Plan to Subsidize the Purchase of So-Called "Toxic" Bank Assets--Posner
Shorter Posner - Congress and the media demonized Wall Street, thus tying Geithner's hands and forcing him to use the private-public investment plan. Posner is amazing - the man expels words and books at an crazy rate.
economics  crisis  bailout  ppip  about(TimothyGeithner) 
march 2009 by tsuomela
Open Left:: Narcissism, The Bubble Economy and American Exceptionalism--Part 1
..shows is how the entire business culture--and, indeed the broader culture as a whole--comes to be dominated by a narcissistic fantasy of its own exceptionalism, its specialness, even uniqueness. This is where one gets books such as Dow 36,000, and The Bush Boom (which I diaried about here). But it's also the very essence of Reaganomics, an escapism from a harsh reality into a fantasy of painless renewal.
narcissism  politics  economics  regulation  exceptionalism  bailout  crisis  bubble  same-old-story 
march 2009 by tsuomela
Following Up « Easily Distracted
Some connected capstone thoughts about various debates on the AIG bonuses and related matters.
bailout  money  morality  aig  bonus 
march 2009 by tsuomela
The Compulsive Theorist: Why a second best bailout may not be good enough
"This case can be put very simply: if we do not use current political momentum to fundamentally reform a system which has shown itself to be unstable and even dangerous, a second opportunity may come at a very high price." 2 kinds of plans - bailout (return to status quo ante) and restructuring.
bailout  economics  crisis  banking  ppip 
march 2009 by tsuomela / Columnists / Martin Wolf - Successful bank rescue still far away
The danger is that this scheme will, at best, achieve something not particularly important – making past loans more liquid – at the cost of making harder something that is essential – recapitalising banks.
bailout  economics  crisis  banking  ppip 
march 2009 by tsuomela
Hernando de Soto Says Toxic Assets Emerged From a Shadow Economy -
These derivatives are the root of the credit crunch. Why? Unlike all other property paper, derivatives are not required by law to be recorded, continually tracked and tied to the assets they represent.
economics  property  wealth  money  bailout  transparency  regulation  law 
march 2009 by tsuomela
Open Left:: In Which I Come Out As A Conservative
Right now, the Obama Administration seems to be devoting its rhetorical resources to countering Republican critiques, rather than attacking the whole mindset, and explaining why it has created both false and unreasonable expectations, which cannot be a guide to judging the pace and nature of recovery. In short, it is doing nothing to prepare the American people for the likely severity and difficulty of what lies ahead.
economics  bailout  gloom-and-doom 
march 2009 by tsuomela
FiveThirtyEight: Politics Done Right: Why AIG Paid the "Bonuses"
The fundamental issue here what I call asymmetrical agency bias. We as human beings tend to attribute our results to skill when we are performing well, but (bad) luck when we are performing poorly.
bias  bailout  aig  bonus  money  agency  psychology 
march 2009 by tsuomela
Matthew Yglesias » Stiglitz Calls Geithner Plan “Robbery of the American People”
Meanwhile, I actually think the most distressing thing about the criticism from folks like Krugman and Stiglitz is what you can infer reading between the lines from how ferocious it is. They, and other leading critics, are acting like people who’ve been totally shut out of the consultation/communication loop. And it’s distressing to see people of their stature and expertise getting shut out while the administration works harder on kissing Wall Street’s ass to try to persuade the finance class to avoid deliberately sabotaging the economy.
economics  bailout  crisis  government  wall-street 
march 2009 by tsuomela
Collapse or Consolidation? - Ross Douthat
If the Western leadership class survives the current crisis, after all, the lesson they're going to draw from it is relatively simple: We must never let this happen again. And while that impulse could be a spur to greater decentralization and democratization, it's more likely to be produce greater supranational regulation, more expansive bureaucracy, and a more hand-in-glove relationship between big government and big business than existed before the crisis.
economics  bailout  crisis  future  results  conservative  politics  power  elites  populism 
march 2009 by tsuomela
Make Haste, Slowly - The Atlantic Politics Channel
Thesis: Financial bailout plan limited by Congress. "The stimulus package debate in February was dispositive
bailout  economics  politics  congress 
march 2009 by tsuomela
Interfluidity :: Our financial system is not the same as "our" big financial institutions
I think it's time to move beyond the nationalization/preprivatization debate and start talking about how to replace rather than reorganize failing firms.... In other words, it's time to move beyond nationalization and talk about state-managed liquidation. I look forward to an America with a strong financial system. I think that's more likely in a world where Citi's logo goes all retro chic like Pan Am. Frankly, I think that's all the (non-negative) "franchise value" that's left in Citi, and several of its peers.
economics  crisis  bailout  nationalization 
march 2009 by tsuomela / Comment / Opinion - How bank bonuses let us all down
Here you can see that this mismatch between the bonus payment frequency (typically, one year) and the time to blow up (about five to 20 years) is the cause of the accumulation of positions that hide risk by betting massively against small odds. As traders say, they have the “free option” on their performance: they get the profits, not the losses. I hold that this vicious asymmetry is the driving factor behind investment banking.
economics  crisis  bailout  finance  financial-services  incentives  talent  rewards  ceo  income 
february 2009 by tsuomela
Santelli's "Tea Party" Illustrates Press Failure : CJR
Particular emphasis on the failure of media to cover or explain the outright fraud by mortgage brokers that contributed to the sub-prime crisis.
economics  recession  crisis  bailout  mortgage  media  failure  fraud  law 
february 2009 by tsuomela
Michael Lind on How America Will Change - The Plank
the result of free market fundamentalism is a global financial collapse that may produce an America with bigger government, more paternalism, and a financial and corporate oligopoly.
future  crisis  bailout  america 
february 2009 by tsuomela
Good Math, Bad Math : Financial Morons, and Quadratics vs. Linears
critiques recent bank capital chart that uses circles to compare capitalization but use linear scale instead of quadratic, thus making the decline look much worse
graphics  statistics  information  economics  bailout 
february 2009 by tsuomela
Baseline Scenario, 2/9/09 « The Baseline Scenario
Especially liked the analysis of the political power of finance and bankers.
economics  crisis  bailout  future  2009 
february 2009 by tsuomela
Restoring financial stability: How to repair a failed system | vox - Research-based policy analysis and commentary from leading economists
The whole purpose of securitisation is to lay risks off the economic balance-sheet of financial institutions. But the way securitisation was achieved – especially from 2003 to the second quarter of 2007 – was more for arbitraging regulation than for sharing risks with markets.
economics  crisis  bailout  finance  failure  securitisation  debt  banking  regulation 
february 2009 by tsuomela
Follow the Money
"There was no credit crisis. What was happening was much more arcane: A few big institutions that had made bad bets were at risk of going bust, and that’s it. And if they had gone bankrupt, it wouldn’t have been the end of the world." - highlights some contrary views that the credit contraction in September 2008 might not have been as bad as Paulson, Bernanke claimed.
economics  banking  finance  crisis  2008  bailout 
february 2009 by tsuomela
naked capitalism: The Bad Bank Assets Proposal: Even Worse Than You Imagined
"Dear God, let's just kiss the US economy goodbye. It may take a few years before the loyalists and permabulls throw in the towel, but the handwriting is on the wall.

The Obama Administration, if the Washington Post's latest report is accurate, is about to embark on a hugely expensive "save the banking industry at all costs" experiment"
economics  crisis  bailout  banking  finance  financial-services  obama  government  gloom-and-doom 
february 2009 by tsuomela
The Big Fix - Can Barack Obama Really Transform the U.S. Economy? -
Overview of the current challenges and thoughts about economic policy by David Leonhardt. Medicine, education, energy. Name checks Mancur Olson and the idea of regulatory capture by interest groups.
economics  crisis  stimulus  bailout  policy  politics  medicine  environment  education  energy  regulatory-capture  interest-groups  power 
february 2009 by tsuomela
Bailout Recipients Hosted Call To Defeat Key Labor Bill
Three days after receiving $25 billion in federal bailout funds, Bank of America Corp. hosted a conference call with conservative activists and business officials to organize opposition to the U.S. labor community's top legislative priority.
economics  bailout  labor  unions 
january 2009 by tsuomela
Interfluidity :: Winterspeak wonderland
Pointers and discussions about the role of government in monetary policy. "Winterspeak invites us to consider the government, the central bank, and the private banking system as a consolidated entity. Money taxed, lent to the government or deposited in a bank is money destroyed (at least temporarily). Money spent by the government, or borrowed from a bank is money created."
economics  money  bailout  crisis 
january 2009 by tsuomela
Why Do Americans Still Hate Welfare? - Economix Blog -
In his book “America’s Struggle Against Poverty in the Twentieth Century,” James Patterson, a professor of history emeritus at Brown University, writes that “the image of the poor person in the 1930s was the agrarian farmer, down on his luck, but not complaining.” Think of Tom Joad, the protagonist of John Steinbeck’s novel “The Grapes of Wrath.”

Starting in the mid-1960s, however, that image began to change: poverty –- especially welfare — became seen by many as largely an African-American phenomenon. It was also during this decade that the word “welfare,” which previously did not have a negative connotation, became “a political epithet,” according to Sanford Schram, a professor of social policy at Bryn Mawr College
economics  class  class-war  poverty  welfare  government  bailout 
december 2008 by tsuomela
The Bailout: Bush’s Final Pillage | Naomi Klein
This is where Treasury’s equity pays off big time. By purchasing stakes in these financial institutions, Treasury is sending a signal to the market that they are a safe bet. Why safe? Not because their level of risk has been accurately assessed at last. Not because they have renounced the kind of exotic financial instruments and outrageous leverage rates that created the crisis. Rather, because the market will now be banking on the fact that the U.S. government won’t let these particular companies fail.
economics  crisis  2008  market-failure  bailout 
november 2008 by tsuomela
Daily Kos: The Panic of 2008
This is an orderly panic. And it marks the end of the world that everyone reading this has known. Perhaps we can muddle through this one without fundamental change, by printing paper and then standing in place. But in reality we need to make changes, and dramatic ones. We need to green the American spirit, because it is not green supply, but green demand which is the key. If people want black things, then "alternative" energy is more expensive old energy. If we want green things, then oil is a boutique fuel for specific purposes.
economics  future  crisis  bailout  2008  environment 
october 2008 by tsuomela
America the Banana Republic: Politics
These are people who want to be rewarded as if they were entrepreneurs. But they aren’t. They didn’t have anything at risk.

That’s almost exactly right, except that they did have something at risk. What they put at risk, though, was other people’s money and other people’s property. How very agreeable it must be to sit at a table in a casino where nobody seems to lose, and to play with a big stack of chips furnished to you by other people, and to have the further assurance that, if anything should ever chance to go wrong, you yourself are guaranteed by the tax dollars of those whose money you are throwing about in the first place! It’s enough to make a cat laugh. These members of the “business community” are indeed not buccaneering and risk-taking innovators. They are instead, to quote my old friend Nicholas von Hoffman about another era, those who were standing around with tubas in their arms on the day it began to rain money.
economics  opinion  commentary  crisis  bailout  risk  finance 
october 2008 by tsuomela
Fear is Back - and Mad as Hell
The poor lumpeninvestor doesn't know what to make of it. It seems like only yesterday he was told that everything was all right. Alan Greenspan said so. So did Hank Paulson. And Ben Bernanke. And George W. Bush. We have the strongest economy in the world. We're unbeatable. Our economy is so dynamic! Our financial sector is so inventive! We're just so damned smart!

The Japanese can live with a 20-year slump if they want. The Europeans never seem to get their economy revved up. But we Americans know how make an economy hum - just give the consumer more credit!

But when the cycle turns from greed to fear…all that credit is like excess fuel in a crash landing. It tends to explode
economics  bailout  2008 
october 2008 by tsuomela | Willem Buiter’s Maverecon | A Special Resolution Regime for banks must put tax payers before shareholders and bank creditors
It’s reasonable to assume that the banking system in the North Atlantic region is insolvent and would be bankrupt but for the reality of recent government bailouts and the expectation of future government bailouts. Certainly, for the system as a whole, the marked-to-market value of its assets is way below that of its liabilities. I strongly suspect that even the hold-to-maturity value of its assets is well below that of its liabilities. Although the system as a whole is broke, there are no doubt individual banks that are solvent. We may not, however be certain as to which banks are solvent and which banks are not.
economics  bailout  banking  financial-services  2008  gloom-and-doom 
october 2008 by tsuomela
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