01/29/2010 02:49:55 PM EST

The mess with the bailouts...

posted by Thothlike

I saw this on the TYT YouTube channel and just had to say something :D

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And for once I actually agree with a teabagger (hold on to your hats... Hell has frozen over and Armageddon is coming)... well half agreeing but still... it's a sign of bad times to come :D

The bailouts of the bank were a TERRIBLE idea... period... what we should have done was bailing out the consumers and let the banks fail... let me explain...

So far the Treasury of the US have committed to bail out the Banks to the amount of $2.2 trillion (of which $1.6 trillion have been spent so far)... and that's not counting the FEDs commitment of $7.6 trillion (of which $1.5 trillion have been spent so far)...

And that's because the Banks were `too big to fail'... well there is no such thing... period...

What the Treasury should have done is say fine you made your mess... now lie in it... and if you fail we will cover the consumer 100 cents on the dollar and they can put that money in a Bank that didn't gamble and failed if they want or keep it at home in a safe if that's what they want... and you can go bankrupt...

So how much would that have cost... well let's say that ALL the banks failed and went bankrupt...
The total supply of money in circulation in private (include non-bank corporations) hands in Dec. 2007 (latest FED rapport) was $759 billion... so even if ALL banks in the country failed and went bankrupt the Treasury would have had to send money orders out to everybody with a bank account to the tune of $759 billion which is only about 1/3 of what they payed the banks... and the economy would have been fine (people would have lost no money and would have had just as much to spend)... and it would have send a POWERFUL message to the remaining bankers... gamble at your own peril... and you would have the remaining bankers begging for regulations so it wouldn't happen again instead of fighting regulation tooth and nail as they do now...

On top of that the FED would have had NO reason to help the banks with so far $1.5 trillion (with promises of a total of $7.6 trillion) thereby increasing the fractional money supply by $15 trillion so far and thereby increase inflation (hurting the economy even more in the long run)...

And on top of that they should have offered to bail out anyone with a sub-prime loan that was under foreclosure which amounts to $187.2 billion by Sep. 2009 (latest numbers)... so add that to the max. $759 billion to the banks and you get that the Treasury would have payed a total of $946.2 billion (more than $500 billion less than they payed to the banks so far... not counting what they have promised to pay... and that's only if ALL the banks failed)... and no private consumer would have lost their home or any money so the economy would have been fine...

But that's just one man's opinion :D

Love Thothlike

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Poll

Should the US Treasury have bailed out the banks?
Yes it was the best thing... 33%
No they should have bailed out the consumers and foreclosures... 66%
No they should have bailed out noone... 0%

Votes: 3
Results | Other Polls
 Display:
The mess with the bailouts... | 14 comments (14 topical, 0 hidden)
Nomi Prins (none / 0)
was one of the first people to lay out all the fact in public. Since then she has kept pretty good track.

"The price tag for the Wall Street bailout is often put at $700 billion—the size of the Troubled Assets Relief Program. But TARP is just the tip of the iceberg of money paid out or set aside by the Treasury Department and Federal Reserve. In her book, It Takes a Pillage: Behind the Bailouts, Bonuses, and Backroom Deals from Washington to Wall Street, Nomi Prins uncovers the hush-hush programs and crunches the hidden numbers to calculate the shocking actual size of the bailout: $14.4 trillion and counting."

http://motherjones.com/poli tics/2010/01/real-size-bail out-treasury-fed

by sisco66 on 01/29/2010 04:36:43 PM EST

hmmm... (none / 0)
I found her grafs a little confusing but here are the numbers I have gathered from the FEDs homepage which comes to a total of $11.6 trillion... all from the period of their conseption until Feb. 2009... now I might be missing some numbers that should be added to the sum and more might have been asked for since and that might be the difference of $2.8 trillion...

But here are the numbers I have (all by Feb. 2009):
Treasury:
TARP:
Promised: $700 billion
Spent: $387 billion
Tax Breaks for Banks:
Promised: $29 billion
Spent: $29 billion
Stimulus Package:
Promised: $168 billion
Spent: $168 billion
Stimulus II:
Promised: $787 billion
Spent: 787 billion
Treasury Exchange Stabilization:
Promised: $50 billion
Spent: $50 billion
Student Loan Purchases:
Promised: $60 billion
Spent: $0
Citigroup Bailout:
Promised: $5 billion
Spent: $0
Bank of America Bailout:
Promised: $7.5 billion
Spent: $0
Support for Fannie/Freddie:
Promised: $400 billion
Spent: $200 billion
Total:
Promised: $2.2 trillion
Spent: $1.6 trillion

The FED:
Primary Credit Discount:
Promised: $110.74 billion
Spent: $65.14 billion
Secondary Credit:
Promised: $0.19 billion
Spent: $0
Primary dealer and others:
Promised: $147.00 billion
Spent: $25.27 billion
ABCP Liquidity:
Promised: $152.11 billion
Spent: $12.72 billion
AIG Credit:
Promised: $60.00 billion
Spent: $37.36 billion
Net Portfolio CP Funding:
Promised: $1,800 billion
Spent: $248.67 billion
Maiden Lane (Bear Stearns):
Promised: $29.50 billion
Spent: $28.82 billion
Maiden Lane II  (AIG):
Promised: $22.50 billion
Spent: $18.82 billion
Maiden Lane III (AIG):
Promised: $30 billion
Spent: $24.34 billion
Term Securities Lending:
Promised: $250 billion
Spent: $115.28 billion
Term Auction Facility:
Promised: $900 billion
Spent: $447.56 billion
Securities lending overnight:
Promised: $10 billion
Spent: $5.59 billion
Public-Private Investment Fund:
Promised: $1,000 billion
Spent: $0
Term Asset-Backed Loan Facility:
Promised: $1,000 billion
Spent: $0
Currency Swaps/Other Assets:
Promised: $606 billion
Spent: $417.86 billion
MMIFF:
Promised: $540 billion
Spent: $0
GSE Debt Purchases:
Promised: $600 billion
Spent: $33.58 billion
Citigroup Bailout Fed Portion:
Promised: $220.4 billion
Spent: $0
Bank of America Bailout:
Promised: $87.2 billion
Spent: $0
Total:
Promised: $7.6 trillion
Spent: $1.5 trillion

Then on top of those comes:
FDIC:
FDIC Liquidity Guarantees:
Promised: $1,400 billion
Spent: $261.3 billion
GE:
Promised: $139 billion
Spent: $139 billion
Citigroup Bailout FDIC:
Promised: $10 billion
Spent: $0
Bank of America Bailout FDIC:
Promised: $2.5 billion
Spent: $0
Total:
Promised: $1.5 trillion
Spent: $0.4 trillion

And:
HUD:
Hope for Homeowners FHA:
Promised: $300 billion
Spent: $300 billion

Total bailout spending:
Promised: $11.6 trillion
Spent: $3.8 trillion

But the discrepancy of $2.8 billion dollars between yours and my numbers are a minor point in this...
I still believe my argument holds that letting the banks fail and instead bailing out the consumers and foreclosures is both an economical good idea as well as being morally superior :D

Love Thothlike

by Thothlike on 01/29/2010 06:47:51 PM EST

[ Parent ]
wow (none / 0)
Nice work. You are in over my head at this point, at the very least making it spin after a night of indulgence. Now does this include the money the fed handed out treasuries to buy back all th3 shit debt from banks and foreign countries as well as to float our debt? or the trillions in lost wealth.

You seem to be doing your homework and be very resourceful. One of the major dominos in this Ponzi scheme was how the Wall Street insiders got the SEC to change the short selling and mark to market rules. Subsequently using the rule changes to create even more leverage on the way down triggering billions in credit default swap payouts and driving AIG, Behr and Lehman into the ground making money hand over fist.


I think a lot this was done by hedge funds and individuals in the know and/or having their hands in rule making cookie jar. Goldman Sachs has a long history of creating markets, "innovation", getting out at the top and shorting all the late players. Which is exactly what they did with Enron, oil and now housing.


If you never checked it out, I laid out the time line for most of this stuff in "Domino" effect. You will probably find that it ties together how the insiders systematically rigged the game as Dylan like to point out.

by sisco66 on 01/30/2010 11:04:44 AM EST

[ Parent ]
hmmm... (none / 0)
Now does this include the money the fed handed out treasuries to buy back all th3 shit debt from banks and foreign countries as well as to float our debt?
Yup :D

One of the major dominos in this Ponzi scheme was how the Wall Street insiders got the SEC to change the short selling and mark to market rules. Subsequently using the rule changes to create even more leverage on the way down triggering billions in credit default swap payouts and driving AIG, Behr and Lehman into the ground making money hand over fist.
We are in absolute agreement here... those shenanigans was the reason it collapsed... no boubt about it...

But I believe my solution would solve that... it would say to the bankers... so you wanted to gamble? well now deal with it... and then let the banks that weren't solvent anymore go under covering the consumers 100 cents on the dollar to go to solvent banks...

And the remaining banks would welcome new regulations to prevent the same thing happening again intead of fighting it... and they would be less likely to do something similar agian...

But there is actually a much deeper rooted problem which if not fixed soon will collaps the whole system no matter what the banks do from here on out... but that's a different discussion you can read my take on here...

Love Thothlike

by Thothlike on 01/30/2010 11:30:41 AM EST

[ Parent ]
FDIC (none / 0)
The other thing that came out of the mark to market and short selling rule changes was the FDIC and Treasury (Paulson) raiding banks who's holdings had been artifically devalued by the rule changes and short selling. Then they took the all the good assets at and gave them to JP Morgan, BofA and others pennies on the dollar, sticking the tax payer with all the bad debt. Not to mention making to big to fail, even bigger.

That should be counted in as part of bailout as well.

by sisco66 on 01/30/2010 02:27:47 PM EST

[ Parent ]
Soon it will become scary... (none / 0)
on how much we agree.
Well analized.

The only alternative I would have seen to letting the banks fail would have been nationalizing them. That would also have made the banking regulations that are now debated unnecessary.

The people who think the government can't do anything right could have stayed or gone to private banks and the customers who want to be treated fairly could have gone to public banks.

"The first thing Fascists usually try to do is silencing the opposition."

by opposition on 01/30/2010 02:47:56 AM EST

hmmm... (none / 0)
yup it's getting scary :D hehe

I'm not sure I agree on nationalizing the banks but I'm willing to have a discussion... but what should definitely be nationalized is the FED... it makes no sence that a private organization has the monopoly of printing the money in any nation...

Love Thothlike

by Thothlike on 01/30/2010 06:28:46 AM EST

[ Parent ]
Fed definitely (none / 0)
Banks only if they fail.

Just to clarify, I wasn't talking about nationalizing all banks, just if they fail and need government money, the money the government gives should be represented by (partial) ownership.

If the government can do nothing right, nobody will give their money to those banks, which means there will be no difference for the private banks. If the government treats small customers more fairly, that just goes to show that the private banks are screwing them and they need to have their rights protected by a public alternative.

There should be no special rights for those public banks, only the restriction that they should operate at least budget neutral and provide fair service to small customers.
Fair credit card rates for example. If the government offers decent rates nobody will get credit cards from the privates, unless they adjust their rates. This is much easier than imposing maximum rates, or other kinds of regulation.

"The first thing Fascists usually try to do is silencing the opposition."

by opposition on 01/30/2010 06:45:37 AM EST

[ Parent ]
hmmm... (none / 0)
I'm not a big fan of government ownership outside of public interest areas (i.e. healthcare welfare infrastucture police firedepartment printing money etc.)...

I'm a Libertarian Socialist (or I'm a believer in Technocratism wanting society to switch from Capitalism to Libertarian Socialism on the way to Technocratism... see here and here to see what I mean)... not to be confused with Bolchevism which is government owns everything whereas Libertarian Socialism is the people owns everything...

So I would prefer that if a bank failed the government would bail out its customers 100 cents on the dollar and then liquidate the bank and transfer ownership to the employies and customers of the bank to run and profit from...

But that's just me :D

Love Thothlike

by Thothlike on 01/30/2010 08:23:05 AM EST

[ Parent ]
Right Technocracy! (none / 0)
There are still things we disagree on.

I understand you position about government ownership, but the crisis has shown that regulation of banking is in public interest.

I would be on your side if it was about nationalizing all banks, but giving customers an alternative seems ok to me. If things that are of public interest (like banking) run badly, I think it would be good to create artificial competition until the market has reacted. Just bailing the customers out wouldn't send a strong enough message to the banks.

I am confinced the public banks wouldn't be able to compete on a long term basis, because of lack of expertise, but if the state can regulate markets by providing essentials I'm all up for it, but that's just me.

"The first thing Fascists usually try to do is silencing the opposition."

by opposition on 01/30/2010 09:22:48 AM EST

[ Parent ]
hmmm... (none / 0)
Oh don't get me wrong... I'm all for the government regulating the banks (and the market) up the wasu :D

That is definitly in the publics interest... so we are in total agreement there...

But I'm not so sure that banks are a public interest area that warrants government ownership (and I think that's the real discussion because you seem to agree that the government should only own things in public interest areas... or maybe I'm reading you wrong)... :D

Here's how I define a public interest area:
Goods and/or services that the society can't live without so it needs a common public ownership (like the government) to safeguard it from failing because society can't function without it...

The difference between me and a Capitalist is that I want the workers (and sometimes customers too) to own and profit from what they themselves produce and Capitalists want a few people with no wested interest in the product other than personal profit to own and profit from what others produce... but that's a completely different discussion :D

Now you could make the argument that banks are nessecarry for society to function... but I'm not sure I agree... but like I said that's the real discussion...

So let me make my point and let's see if we can reach some common ground :D
First we have to differeciate between what society needs and what it wants...

Society needs infrastructure because otherwise it cannot distribute goods over long distances and people would go hungry and die... so government should own and maintain infrastructure...

Society wants cars so it can travel faster from place to place (it doesn't need it... people can walk but it makes life easier to have a car so it wants it)... so government shouldn't own car factories...

Society needs most of its people to live long and healthy and productive lives so it can produce the goods and services needed to feed its citizens... so government should own healthcare...

Society wants... well you get the picture...

Now to the banks...
Society needs money to fairly exchange goods and services between its citizens (under scarcity)... so the govenment should own the FED (there we are in agreement)...

But I don't think society needs banks... they could just as easily store their money in a safe at home and society would be just fine... society might want banks because its easier to handle money that way and it provides the security of being covered if the money is robbed but it doesn't need it... so in my book government shouldn't own banks (aside from the FED)...

Now you are welcome to disagree and I'm willing to have a discussion but don't take this as I'm against government regulation in the bank industry... what I'm against is ownership :D

Love Thothlike

by Thothlike on 01/30/2010 10:50:23 AM EST

[ Parent ]
Some very good points (none / 0)
I might need some time to think about it.

Now there are only few things I can say.

You raise the question of what society needs and what it wants and I would say that at certain points of development that changes. Unless you talk about pure survival, but that would mean that government should own everything connected to food production, in contrast to military.

Currently society functions in a certain way and some aspects are going wrong and might cause big problems.

Your answer to that is that government should regulate these areas, my answer is that government should at least consider the possibility to offer an alternative, if that could be done with little effort and no negative effects for the budget.

Well those were just my first reactions, but I will think about it a little more.

"The first thing Fascists usually try to do is silencing the opposition."

by opposition on 01/30/2010 11:12:24 AM EST

[ Parent ]
hmmm... (none / 0)
I might need some time to think about it.
You take all the time you need... you have until the marked crashes completely later this year in a way that will make the 1930'ies depression seem like the biggest upsving in history... but take your time :D

I would say that at certain points of development that changes.
Off course it does :D
If you have a society consisting of 30 people living in the jungle in Uganda you all have access to the medicinman so to don't need the chief to provide healthcare and you don't need infrastucture to exchange good between you (you just walk the 30 feet and get it over with) so you don't need the chief to build and maintain roads and other...

And in a society the size of the US you do need those things because of number of citizens and distances so the government should own and maintain those things...

And everywhere in between you have various changing degrees of needs and wants in a society where you can debate whether government should or should not own certain areas... that is why I said that I'm willing to discuss whether banks are a need or a want in the US... so far I'm of the oppinion that banks are a want but I might be wrong and if you make good arguments for putting banks in the need category I'm open to changing my mind... (see I'm the most open minded man in the world) :D hehe

My answer is that government should at least consider the possibility to offer an alternative, if that could be done with little effort and no negative effects for the budget...
I will content to there being areas of want where the government could successfully offer a public option...

Those areas is when society wants something but there a no viable private options to fill that want and it economically solvent to do so...

Example:
Let's say society wants to have easier transportation but have no technology to do so other than walking and no private companies have sprung up to devolop transportation... then it would be ok for the government to go in and say let call in some scientist and work on this and after they then invent the car then start production to deliver cheap cars to people... and if/when companies realize that this is a good idea and start to produce cars and sell them too then when they can produce to cover demand the government can withdraw from the field and let private companies take over again... (and just remember my idea of a private company is VERY different from a Capitalists idea of a private company but for government the rules are the same... own only public interest areas and only start up want areas and then get out if viable private options surface)...

Love Thothlike

by Thothlike on 01/30/2010 11:57:53 AM EST

[ Parent ]
time line (none / 0)
1.  Graham, Leach, Bliley (Repeal of Glass Steagle) -1999
2. Commodities Futures Moderization Act, CFMA (Enron Loop Hole) – 2000
3.  Enron begins manipulating  gas and electric prices in the west – 2000
4.  Enron collapses  exposing flaws and loop holes in CFMA – 2001
5.  Bush Tax Cuts 2001-2003
6.  Double Digit inflation in housing market begins -2003
7.  Elliot Spitzer and state AG's file lawsuit to stop predatory lending practices, looses. 2003-2004
8.  Fed goes on unprecedented series of rate hikes trapping people in bad loans/credit lines 2004-2007
9.  SEC and Fed allow changes in bank capitalization rules in overheated market (40 to 1), 2004
10.  Banks pull out all stops on lending with Ninja and liar loans – 2005
11.  Bankruptcy Reform Bill (Usury credit practices, removing  judges ability to settle debts) - 2005
12.  Mark to Market Accounting rules begin bank runs and triggering CDS payouts – 2007
13.  Housing Market Begins to Collapse begins recession – 2007
14. Oil Hits $140 a barrel – 2008
15. U.S  Economy Collapses, followed by the world economy-  2009
16.  Commercial Real-estate Market Collapses - 2009
2010 - Idiots finally realize that they have caused the second world wide supply side depression in 100 years


The short selling uptick rule was changed in 2003 or 2004. However the naked shorts were still supposed to be illegal but once it became clear that Chris Cox, Bernanke and Paulson were not going to enforce any rules, the naked shorts became fair game.  So we bailedout banks that were driven into the dirt with illegal short selling and insider information.

What kills me is that the amount money that these fuckers made is peanuts compaired to the damage they did to make it. That goes for the military industrial complex as well and oil companies as well.

by sisco66 on 01/30/2010 11:18:22 AM EST

The mess with the bailouts... | 14 comments (14 topical, 0 hidden)
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