The Long Crisis

Posts Tagged ‘bank bailout’

You should be enraged at the way the “too big to fail” banks have treated the American taxpayers. After playing casino style games and losing big time the big banks came to Washington begging for bailout funds and got them from our corrupt politicians. Then instead of using those funds to lead money to American small business owners and to credit worthy individuals they used those funds to beef up their own weak balance sheets and to pay huge undeserved bonuses to themselves. This was a gross misapplication of funds.

With thanks to Gary North the following provides additional comment and information on the “Move Your Money” movement.

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The Huffington Post has come up with an appropriate protest movement. Let’s pull our money out the the bailed-out banks and put it in local banks that lend to locals. Who are the locals? People just like us.

This makes sense economically. If you ever want a loan, get it from your own banker. If it’s a local bank, you will known by the banker and be treated well.

The FDIC insures all accounts up to $250,000. Your money is as safe in a local bank as a bailed-out mega-bank.

The folks at Huffington are on the Left. But we can all agree when we see insider bailouts like the ones in September and October 2008.

They have produced a video. This video is biased, mean-spirited, and simplistic but I love it! The more of these low-budget YouTube videos on the Big Bank bailout, the better.

The Huffington Post article is here. The authors — Mrs. Huffington and former Chief Economist of the Senate Banking Committee, Rob Johnson — have had enough.

They do not call this a bank run. They call it a withdrawal tax. I like that.

I agree with them on this point: the protest is neither Right wing nor Left wing.

The idea is simple: If enough people who have money in one of the big four banks move it into smaller, more local, more traditional community banks, then collectively we, the people, will have taken a big step toward re-rigging the financial system so it becomes again the productive, stable engine for growth it’s meant to be. It’s neither Left nor Right — it’s populism at its best.

Consider it a withdrawal tax on the big banks for the negative service they provide by consistently ignoring the public interest.

It’s time for Americans to move their money out of these reckless behemoths. And you don’t have to worry, there is zero risk: deposit insurance is just as good at small banks — and unlike the big banks they don’t provide the toxic dividend of derivatives trading in a heads-they-win, tails-we-lose fashion.

Think of the message it will send to Wall Street — and to the White House. That we have had enough of the high-flying, no-limits-casino banking culture that continues to dominate Wall Street and Capitol Hill. That we won’t wait on Washington to act, because we know that Washington has, in fact, been a part of the problem from the start. We simply can’t count on Congress to fix things. We have to do it ourselves — and the big banks are the core of the problem. We need to return to the stable, reliable, people-oriented approach of America’s community banks. . . .

JP Morgan/Chase, Citi, Wells Fargo, and Bank of America may be “too big to fail” — but they are not too big to feel the impact of hundreds of thousands of people taking action to change a broken financial and political system. Let them gamble with their own money, not yours. Let’s turn big banks into smaller banks. We’ll all be better off — and safer — as a result.

Make it your New Year’s resolution to move your money. We can’t think of a better way to start 2010. Let’s start taking back our country from the big banks and the corrupt politicans in their pockets.

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Samah El-Shahat, Al Jazeera’s resident economist, has written a series of insightful articles about the ongoing worldwide financial crisis. Al Jazeera has become, believe it or not, one of the world’s leading hard news organizations, and has hired first class talent from around the world. Al Jazeera presents the news in an old fashioned way, the way the American major networks used to do before the age of spin set in.

Samah El-Shahat is astonished, as I am, that the goal of the Obama administration, and indeed the entire Western world governments, seems to be to turn back the clock to 2006 instead of actually fixing the structural problems that got us into this financial mess in the first place.

She also believes that much of the “green shoot” talk, at least at this stage, is just so much nonsense. The actions being taken by the US and other governments is actually setting the stage for another meltdown. How can anyone believe that problems caused by too much debt and leverage can be fixed by adding more debt and leverage to the system and raping the taxpayers along the way to the benefit of the bankers and elites?

Now for Ms Samah El-Shahat’s take on the issue.

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Business as Usual

So I am still astonished that that governments are still hell-bent on maintaining the status quo, the business as usual approach that got us into this mess in the first place.

Has a single bank management been made to change despite being the source of the mess? Has a single bank been truly nationalised in the real sense of the word? Has any real clean audit of a bank happened? And please let’s not bring up stress tests that were made to make sure everyone passes…

For every one of those questions the answer is a loud and resounding NO.

Some of the banks are now being allowed to payback some bailout money – banks such State Street and JP Morgan Chase. But they are being allowed to do so without revealing the extent of the toxic assets on their balance sheets.

“I fear these banks are walking time bombs… freed from any noose or hold the government had over them because they have paid back their bailout”
We are none the wiser than we were at the start of this crisis as to how truly ‘insolvent’ they are.

Yes, I hate to bring up that word but just because they are paying back some Treasury Asset Relief Program money doesn’t make them healthy. Remember, they are using taxpayer money to pay the taxpayer back.

The Obama administration had a plan to get rid of these toxic assets called the Public Private Partnership Investment Partnership – the PPIP.

And even though the PPIP gave investors and Wall Street incredible inducements, and huge taxpayer subsidies to buy and sell these toxic assets, the banks did not play ball.

The plan was laid to rest last week, which is extraordinary because it was the central plank of the Obama administration’s plan to rescue the banks.

I think this is disastrous. Not because I liked the PPIP, I thought it was grossly unfair and I agree with the economists Paul Krugman and Joseph Stiglitz when they said it transferred taxpayers money to the banks.

But at least the PPIP tried to deal with the toxic assets that got us into this mess in the first place.

Now I fear that these banks are walking time bombs, which are now walking away, freed from any noose or hold the government had over them because they have paid back their bailout.

And if we do not get an economic recovery soon, the toxic assets on the banks’ balance sheets will detonate and bring us all down with them.

The banks are gambling on the green shoots of a miraculous economic recovery, which I think is delusional and shame on those in power for allowing them yet another chance to gamble with our economic futures.
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For the complete article visit the Al Jazeera website.

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It looks like the fix is once again in. The results of the much ballyhooed bank stress tests will soon be released in a general way (Treasury will not be releasing the details) and guess what? Early leaks of the results are that all the banks are better off than generally thought.

However, according to an analysis by Nouriel Roubini the Department of the Treasury and the FDIC used assumptions for the macro variables in 2009 and 2010 that are so optimistic for both the baseline and more adverse scenarios that actual data for 2009 are already worse than the adverse scenario forecast for 2009 and 2010.

Roubini claims that the results of the stress test – even before they are published – are not worth the paper they are written on as they make assumptions on the economy that are much more optimistic –even in the worst scenarios that the FDIC has designed – than the actual figures for Q1 of 2009.

What is it with the special relationship between the US government and the big banks? With all of the billions handed out to the “too big to fail” banks at the expense of the taxpayers could it be that the thieves behind the banks really do call most of the shots in America?

Certainly it seems like Tim Geithner and all of Obama’s key advisers have a cozy relationship with Wall Street and the banksters that is costing the taxpayers billions. The government is socialising losses and privatizing the potential for gains for the banksters at a pace never before experienced in America.

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