Quelle Surprise! Team Obama Having Trouble Selling TARP Success « naked capitalism

Monday, October 4, 2010

Quelle Surprise! Team Obama Having Trouble Selling TARP Success

Barack Obama is purported to have studied the Lincoln, Roosevelt, and Reagan presidencies in depth before he took office, yet he appears to have ignored one of Lincoln’s best known sayings: “You may fool all the people some of the time, you can even fool some of the people all of the time, but you cannot fool all of the people all of the time.”

We’ve commented at length at the Obama Administration propensity to rely on propagandizing to mask the shortcomings of its policies. No where has this been so evident as on the financial services front. As we wrote:

The widespread, vocal opposition to the TARP was evidence that a once complacent populace had been roused. Reform, if proposed with energy and confidence, wasn’t a risk; not only was it badly needed, it was just what voters wanted.

But incoming president Obama failed to act. Whether he failed to see the opportunity, didn’t understand it, or was simply not interested is moot. Rather than bring vested banking interests to heel, the Obama administration instead chose to reconstitute, as much as possible, the very same industry whose reckless pursuit of profit had thrown the world economy off the cliff. There would be no Nixon goes to China moment from the architects of the policies that created the crisis, namely Treasury Secretary Timothy Geithner, Federal Reserve Chairman Ben Bernanke, and Director of the National Economic Council Larry Summers….

Obama’s repudiation of his campaign promise of change, by turning his back on meaningful reform of the financial services industry, in turn locked his Administration into a course of action. The new administration would have no choice other that working fist in glove with the banksters, supporting and amplifying their own, well established, propaganda efforts.

Thus Obama’s incentives are to come up with “solutions” that paper over problems, avoid meaningful conflict with the industry, minimize complaints, and restore the old practice of using leverage and investment gains to cover up stagnation in worker incomes. Potemkin reforms dovetail with the financial service industry’s goal of forestalling any measures that would interfere with its looting. So the only problem with this picture was how to fool the now-impoverished public into thinking a program of Mussolini-style corporatism represented progress.

A core proposition of marketing is that your advertising cannot fundamentally misrepresent your product; you’ll not only disappoint and alienate customers, but you will also built a brand reputation for dishonesty. Yet the Obama Administration honestly seems to believe it can snooker Americans on any and every topic. When that approach fails, the fault must be in its messaging, not in its fundamental strategy.

The Financial Times has a revealing piece tonight on the rather late recognition by the Administration that its efforts to depict the TARP as a success are getting no traction. The bizarre thing is the subtext , namely that Administration members themselves as having no choice and being victims:

Although it is too early to come up with a final estimate of the cost of the co-ordinated cleansing of the financial system, the US effort looks to have come comfortably below the average fiscal cost of resolving a systemic crisis – 12.8 per cent of gross domestic product, according to a World Bank study.

Yet no one is expecting political rewards for Democrats in the midterm elections next month. In a striking phrase, Mr Geithner acknowledged at a conference in Washington last week that “we saved the financial system, but lost the country doing it”.

Yves here. The 12.8% figure is wildly misleading. It does not include the damage of the crisis to the broader economy, such as the fact that the US is suffering lower growth and much higher unemployment as a result, and this lower output level is just about certain to produce a permanent reduction in the standard of living. The Bank of England, by contrast, has tried to measure the cost of the crisis using these broader considerations (which are admittedly very hard to measure) and has concluded the cost of the financial crisis was one to five times GLOBAL GDP.

Moreover, the tacit assumption in the Geither comment, and other Administration defenses of its bank-friendly actions, is that the choice was the program that the Administration implemented or no intervention at all. But that is bunk. There were plenty of other options for shoring up the battered financial firms; giving them generous support with virtually no strings attached, and in particular, no changes in management, was unheard of, at least outside of kleptocracies. Various forms of resolution, in particular the Nordic model, were widely discussed early in the Obama Administration and pointedly ignored. The Obama crowd took a tough line with the auto companies, dispatching its top brass, forcing the recipients to produce long term plans, forcing bondholders and union members to take haircuts. Why did the banksters get kid glove treatment? The answer is all too obvious: financiers are one of the biggest sources of campaign contributions.

The TARP was created by the Bush regime; why not distance yourself from it or deploy it differently? This Administration has chosen to make the TARP its own and has no one but itself to blame for the consequences.

67 Comments:

Glen says:

October 4, 2010 at 2:24 am

There certainly seems to be an effort being made to “celebrate” the success of the TARP. Here’s a couple at Huffpo:

http://www.huffingtonpost.com/herbert-m-allison/the-untold-story-of-tarp_b_748465.html

Please feel free to leave a comment on them. Here’s mine:

TARP was the tip of a massive Wall St bailout:

http://www.ritholtz.com/blog/2009/06/bailout-costs-vs-big-historical-events/

Bankruptcy is the normal process, but it was not used. As a result, we have TBTF Wall St banks which are now larger, more reckless, and out of control, and toady regulators which have been bought by the banks.

Paulson/Bush started the bailouts in 2008, but after the elections, there was a big debate about what to do, complete with very different proposals by economists like Stiglitz:

http://www.youtube.com/watch?v=kz-zcal1nDo&feature=channel

Geithner’s approach won. Bankruptcy would not be used on the banks, but it would be used on GM, one of the largest global multi-nation corporations in the world.

Could it be because bankruptcy means auditors will examine the books? Here’s what happen when the auditors went through Lehman Bros. books:

http://www.independent.co.uk/news/business/news/fraud-charges-loom-for-lehman-bros-1920944.html

Massive fraud.

If Obama can argue that we cannot “give the keys to the car” back to the Republicans, then why did he give the keys back to the Wall St banks that did the exact same thing?

Just yesterday, Gretchan Morganson predicted, we would have to bail the banks out again:

http://www.nytimes.com/2010/10/03/business/economy/03gret.html

So if TARP was so successful, why are there predictions we will have to do it AGAIN?

Glen says:

October 4, 2010 at 2:25 am

Here’s the link to the second story:

http://www.huffingtonpost.com/2010/10/01/tarp-bailout-profits_n_746537.html
fresno dan says:

October 4, 2010 at 5:53 am

thanks for the documentation of all the media stories about TARP being a “success” – Astounding!

As long as the chief economists of the USA believe that the problem is lack of credit, and that the 30 years of stagnant wages has nothing to do with our problems, we will continue to pour water on a drowning man in the belief that he is on fire.
- Sauron says:
  
  October 4, 2010 at 9:04 am
  
  Great metaphor!
mezcal says:

October 4, 2010 at 11:24 am

I attempted to comment on the Allison piece but got repeatedly modded to the bleachers, Glen.

Allison is just another self-serving pigman slithering back and forth between lucrative financial-sector and upper-level government gigs.
Looks like he bailed out at the top of the Rubin/Summers/Greenspan/Clinton bubble which he undoubtedly played a substantive role in creating during his tenure at Merrill.

“Mr. Allison began his career at Merrill Lynch as an associate in investment banking and served variously as Treasurer, Director of Human Resources, Chief Financial Officer, Executive Vice President, President, Chief Operating Officer and as a member of the Board during his 28 years there.”

http://en.wikipedia.org/wiki/Herbert_M._Allison

I’m sure he unloaded his pets.com stock to some hapless public pension fund manager.

Hey Herb, how about you EABODADIAF.

OK, so maybe it was a bit over the top ;)
ChrisPacific says:

October 4, 2010 at 5:22 pm

Good quote from the Gretchen Morgenson article:

“THE crisis is about loss redistribution,” said Edward J. Kane, professor of finance at Boston College and an authority on regulatory failures. “In a crisis, these institutions have much more power with the government than taxpayers do and they will make it seem in the interests of responsible officials to rescue them, whether that’s Congress, the Treasury or the Federal Reserve.”

Politicians, by their nature, are vulnerable to cognitive capture. You don’t get to be president by being incredibly good at resolving a financial crisis – you do it by being incredibly good at winning elections. Once you are in office you need to rely on advice, and Wall St. has done a good job of ensuring that the only advice politicians will ever hear is theirs.

I don’t think it’s too late for Obama to change course – he could have a “Road to Damascus” moment in which he realizes he’s been misled, removes his corrupt advisors and decides to side with the little guy. But he needs to recognize that it’s (a) possible, (b) necessary and (c) less politically costly than continuing with the status quo, and I’m sure the Wall St. spin machine is sparing no effort to prevent him from reaching those conclusions.

jbmoore says:

October 4, 2010 at 3:22 am

TARP wasn’t the only Bush policy that became Obama’s. Gitmo is still being used as a prison. The Administration is still using the States Secrets defense for some legal cases involving wiretaps and National Security Letters. Instead of getting out of Iraq and Afghanistan, we are still in both countries. And, his timing couldn’t have been worse to approve more oil drilling in federal waters, then have BP blow out a well and cause the biggest oil spill in American waters. Nothing has really changed significantly at the national level regarding domestic and foreign policy despite all of the rhetoric. Since nothing has changed, there is little to distinguish the Democrats from the Republicans even though the Republicans left the Democrats with a mess to clean up.

nilys says:

October 4, 2010 at 3:35 am

“why not distance yourself from it or deploy it differently?”

From the point of view of the outcome, does it really matter whether they should have pretended or not? Maybe it never occurs to them that their policies would not work. They probably thought that by now the economy would be chugging along nicely. If the economy recovered, then they would claim that the sacrifices were justified. Or maybe the current president does not care to be re-elected. Really, why bother? He personally would get nice speaking fees, a book deal, a library, a pension,etc. On the other hand, if he were to start stirring water, he could be impeached by now for something. Or maybe it’s that TARP or no TARP, if the economy does well the stock of the administration is up, if the economy does not do well, then they may be out of office…

attempter says:

October 4, 2010 at 3:37 am

There sure were plenty of alternatives, both within the broad bailout concept, and even better, alternatives to the Bailout itself.

And all the nonsense about the successful end of the TARP centers on two lies:

1. The TARP = the bailout;

2. The TARP didn’t cost much.

The above post dealt with the Truth about #2. Only by an absurdly narrow and arbitrary measure can the TARP be said to have cost little. But then they had practice with this kind of lie with the stress tests.

As for #1, MSM and government propaganda tries to deny it, and perhaps with some success. (I haven’t seen a poll asking, “Do you think the TARP is the whole bailout or just a small part of it? Do you know it’s just a small part of it? How small a part do you think it is?”, and so on.)

But the fact is that not only is this not the end of the Bailout, but on the contrary the Bailout is now the permanent economic plan for what should be called Bailout America. It’s a corporatist regime with a command economy, with the command structure ramifying out from the finance sector, while all government policy has as its number one priority maximizing the extractions of that sector.

As for the criminal Obama, he’s a neoliberal ideologue (and status quo elitist by personality; he truly considers the Jamie Dimon/Tony Hayward type the highest human type, the best kind of person, the bedrock of his toxic concept of “civilization”) who came into office with one and only one intention – to aggressively pursue police state corporatism, to consummate the Reagan agenda.

Every significant action of his fits this pattern perfectly, while there’s no alternative theory which better fits even a modest fraction of the evidence. Evidence can’t match theory any better than that.

Doug Terpstra says:

October 4, 2010 at 6:04 am

“As for the criminal Obama, he’s a neoliberal ideologue … who came into office with one and only one intention – to aggressively pursue police state corporatism, to consummate the Reagan agenda.”

“Every significant action of his fits this pattern perfectly, while there’s no alternative theory which better fits even a modest fraction of the evidence.”

From Stephen Lendman: “Obama’s Hard Line Neo-Con Agenda”
http://sjlendman.blogspot.com/

“Straightaway, Obama’s promised “change” and “yes we can” became hard line foreign and domestic extremism, betraying his loyal constituency and any hope for kinder, gentler policies. His populist hypocrisy now exposed, voters are losing faith, but most remain mindless about the harm he commits daily, much of it touching them directly.”

“…a rogue administration rampaging at home and globally, most recently involved in a failed Ecuadorean coup, and for sending FBI goon squads against Chicago and Minneapolis anti-war/pro-Palestinian activists.”
- Sauron says:
  
  October 4, 2010 at 9:20 am
  
  Obama is in improvement over Bush only in the sense that he is not as abrasive, and smarter and smoother–not as much a bumbling embarrassment.
  
  I was prepared to be disappointed with Obama, but not this disappointed. The man is a cipher in the system. A weak figurehead like W.
  - attempter says:
    
    October 4, 2010 at 9:58 am
    
    I find him even more abrasive. He’s just as obviously a liar and a criminal, but if I had to choose I’d take Bush’s phony down-home demeanor (even with the stupid smirk) over Obama’s supercilious professorial elitism and condescension. Obama also has that disgusting “mediator” thing going, while Bush was more of a direct enemy.
    
    That’s of course just an aesthetic difference. Substantively I loathe them both as much as it’s possible to loathe somebody.
    
    Bush never embarrassed me, because I never for a second considered him to represent me or the true America, any more than Obama does. They’re both just criminals. Let Bush’s voters be embarrassed, if they’re capable of it. Same for Obama and his unrepentant cultists.
    - Skippy says:
      
      October 4, 2010 at 11:01 am
      
      Why has the dead parrot sketch, backed by $$$$$ sq. running for the next presidential election popped into my head…eh. Would most notice?
      
      Skippy…one with red and blue in its feathers.
    - psychohistorian says:
      
      October 5, 2010 at 3:14 am
      
      I am more bothered by Obama because he should know better while Bush has had a silver spoon up his ass from the beginning and anyone expecting different was deluded.
      
      When you look at Obama as a wanna be Bush you see how sick our faith in the Eastern aristocracy is in relation to our needs for humanistic political leadership. Implement confiscatory inheritance and unleash REAL leadership instead of the sociopaths we are forced to endure currently.

Bill says:

October 4, 2010 at 3:50 am

Mr Geithner acknowledged at a conference in Washington last week that “we saved the financial system, but lost the country doing it”.

Lets hope the “country” loses the asshats that voted TARP in and started the blatant ball of middle class destruction rolling . Vote the thieves out to a man in November . Tea party is a clone to the corrupt system we have . No better than whom are now in office . Are they all we the people could come up with ? Or .. did they corrupt us more , slipping and and setorying whole households with their empty promises . I have heard no new candidates on TV ( Tass media ) say they are going to take on the finance system . They ALL get their moneys to run from the banks . Campaign and Lobby reform should be Top of the List. Until then its more of the same ad nauseum .

DownSouth says:

October 4, 2010 at 6:14 am

Yep.

Wasn’t it someone on this blog who pointed out the other day that this “we saved the financial system” declaration will, in the end, be Obama’s “mission accomplished” moment?
Glen says:

October 4, 2010 at 5:57 pm

They haven’t saved the financial system. They have handed it over as a hostage in an ongoing action by financial terrorists.

How in the world could TARP be called a success. It’s pretty much something a six years old could figure out (give them lots of money) but already have a moral sense that it’s wrong (giving bullies my lunch money will just get me beat up every day).

The only financial smarts was to make it difficult to follow, non-transparent, and obtuse. In that aspect , it’s to be considered a “state of the art” derivative , probably not surprising since I’ll bet the whole mess was concocted by the same pool of quants that make the current gobbledygook that passes for OTC derivatives (and probably related to the same pool of lobbiest that write our 2,000 page laws in Congress.)

Jojo says:

October 4, 2010 at 4:25 am

Businessweek seems to jump on the positive side of TARP in the current issue:
============
Businessweek
September 30, 2010

TARP Didn’t Bust the Bank
The much-maligned bailout program made money on most Wall Street investments and cost less than expected

…

The bottom line: TARP’s bank bailouts are turning a profit, and TARP overall may cost about $50 billion, hardly the boondoggle many pols charge.

===========

http://www.businessweek.com/magazine/content/10_41/b4198029649845.htm

Where Did the TARP Money Go?
Love it or hate it, TARP didn’t bust the bank

– 10/2008: TARP law passes, $700 billion allocated

– 7/2010: The regulatory reform law shrinks TARP to $475 billion and imposes a ban on starting new bailout programs.

– 9/2010: The Administration’s latest ballpark estimate of losses ($50 billion) is an improvement on the Congressional Budget Office’s August estimate of $66 billion.

Major TARP Programs

Bank Bailouts: $250 billion committed. Expected repayments: almost everything. Expected profits: $16 billion so far.

Auto Bailouts: $82 billion committed. Expected repayments: $55 billion. Expected losses: $27 billion.

AIG Bailout: $70 billion committed. Expected repayments: $25 billion. Expected losses: $45 billion.

Housing: $30 billion committed. Expected repayments: None. Expected Losses: $30 billion.

Public-Private Investment Program (purchases of toxic assets from banks, TARP’s original purpose): $22 billion committed. Expected repayments: $21.5 billion. Expected losses: $500 million.

Data: Bloomberg
http://www.businessweek.com/magazine/content/10_41/b4198029792387.htm

Skippy says:

October 4, 2010 at 5:17 am

Sorry Jojo to bang in here but, I would like to see the *value* quantified, not some jacked up exchange shit being ramped with incressingly devalued dollars, being spoon fed the uninformed.

Skippy…show me the value Ben, Timmy, Larry et al before you all run off into the sunset with your ill-gotten gains, living the life of prestige, leisure and wont of nothing.
Doug Terpstra says:

October 4, 2010 at 6:26 am

Jojo, I’m guessing you’re not buying the propaganda, just documenting it, but for others, see Glen’s link about TARP as “tip of a massive Wall St bailout”:

http://www.ritholtz.com/blog/2009/06/bailout-costs-vs-big-historical-events/

And Attempter’s point:

“…MSM and government propaganda tries to deny it, and perhaps with some success. (I haven’t seen a poll asking, “Do you think the TARP is the whole bailout or just a small part of it? Do you know it’s just a small part of it? How small a part do you think it is?”, and so on.)”

“But the fact is that not only is this not the end of the Bailout, but on the contrary the Bailout is now the permanent economic plan for what should be called Bailout America. It’s a corporatist regime with a command economy, with the command structure ramifying out from the finance sector, while all government policy has as its number one priority maximizing the extractions of that sector.”

Of course, Yves greater point is that after the trillions of absolute dollars borrowed and printed, the cost to the real economy and lives is incalculable. They (Obama, Bernanke, Geithner, Summers, et al.) don’t seem to get it—or worse, they probably do.

Alan Fendrich says:

October 4, 2010 at 5:41 am

Unfortunately, a credit collapse that is interrupted in mid fall through TARP bailout,etc. is a credit collapse that failed to accomplish its purpose: purging and cleansing the system of excesses.

Its only a guess, but I’d say we’re going to see the other shoe to drop.

Doug Terpstra says:

October 4, 2010 at 5:56 am

Thank you, Yves. How right you are: the cost of the ongoing bailouts to the economy, millions of families, and the world is incalculable.

Geithner’s comment: “we saved the financial system, but lost the country doing it,” sounds almost apologetic, but of course what he really means is: “The operation was a success; so what if the patient died?”

Surely, Obama is the greatest bait-and-switch in American history. But most surprising (and suspicious) is the dramatic dengeneration of the post-election con job, as if to ensure midterm “losses”. Get ready for social insecurity. Is my foil hat on too tight?

Cynthia says:

October 4, 2010 at 8:55 am

The only thing that the TARP cheerleaders have anything to cheer about is that TARP prevented a depression. But I’m beginning to believe our country would be in much better shape today had our economy completely collapsed into a full-blown depression, instead of it slowly slipping into a long-drawn-out recession. Then the American people would’ve known without a doubt that the banksters caused the depression, and that TARP was nothing more than one big fat welfare check to these sleazy, slimy crooks! But because we are merely in a recession, long and drawn-out though it is, it’s much easier for the American people to get sucked into blaming Islamic terrorists or Mexican immigrants or pinko leftists or god-hating atheists, or whatever scapegoat that pops into their head, for all of their economic woes.

And I must say that Timmy would’ve have been right for a change had he inserted the word “crooked” into his quote to read: we saved the “crooked” financial system, but lost the country doing it.

Neil D says:

October 4, 2010 at 6:22 am

The damage was done long before President Obama came into office. It was done by globalization that shipped jobs out of American to low wage countries. It was done by Americans clinging to their middle class lifestyles by running up debt. It was done by financiers that lowered lending standards and created toxic assets. It was done by slimy real estate agents, mortgage brokers, lawyers, closing agents, and home appraisers that facilitated massive frauds.

It’s a fantasy to think now that if only we had done something differently in 2008 and 2009 that everything would be better. Did TARP prevent even worse pain? Who knows? Would nationalizing the banks or firing their management make us feel better about the disaster we are facing? Maybe, but nothing can reverse the damage already done by the stupidity and greed of millions of Americans.

DownSouth says:

October 4, 2010 at 7:44 am

Wrong.

You don’t correct what ails America by doing what Obama did, that is to leave the same people in charge who created the problems so they can “correct” future problems.

Granted, you can’t put the spilled milk back in the bottle, but you sure to hell can make substantive changes to prevent more milk from being spilled in the future.
- DownSouth says:
  
  October 4, 2010 at 8:06 am
  
  And to carry the “Mission Accomplished” analogy a little bit further, your assertion is tantamount to Bush apologists arguing that his administration couldn’t have done anything differently in the wake of 9/11, and doing things differently wouldn’t have affected the outcome.

killben says:

October 4, 2010 at 6:45 am

The obvious bailout was the TARP. The not so obvious bailout has been the various machinations by the Fed. While treasury does the TARP, Fed has provided and is providing “Stealth TARP” to its bankster pals.

So these banksters were (and are being) bailed out with 2 TARPS: “Treasury TARP” and “Fed TARP” — with no limits on the “Fed TARP” — it is an endless stream of money at 0%.

While at least we can get rid of these politicians responsible for the “Treasury TARP”, how do we get rid of Fed for the “Fed TARP”

Fed can go about it in a stealth manner with no media fanfare.

You end Fed you have saved America! Till then banksters will enjoy and tax-payers and savers will be screwed. Can we take the country from the Fed?

vlade says:

October 4, 2010 at 6:53 am

I was fascinated by people comparing Obama to Lincoln, as I could not understand why.

Lincoln wasn’t a good orator (in fact, he was pretty bad at impromptu speaking – at Gettysburg he wasn’t the main speaker).
He was a compromiser – but with a goal, and when the compromise failed he didn’t have any problems to take a rapid and decisive action (suspending habeas corpus in Maryland, firing his generals who didn’t “produce” etc.).

Anything but what Obama is.

DownSouth says:

October 4, 2010 at 7:58 am

I was watching a program on Cspan Saturday night, an interview of an author who wrote a book comparing Lincoln to Jefferson Davis.

The author said Lincoln was a magnanimous and forgiving man, but there were two places where he parted company with Davis and refused to compromise:

1) The conviction that the Union should be preserved, and

2) The belief that slavery was evil
- DownSouth says:
  
  October 4, 2010 at 8:15 am
  
  I’d say the advocates of human enslavement underestimated Lincoln, but they sized up Obama quite accurately. Their lavishing campaign moneys on Obama have therefore proven to be a stellar investment.
- vlade says:
  
  October 4, 2010 at 8:50 am
  
  One can say he was very willing to compromise on means, but very little on ends.

Rex says:

October 4, 2010 at 8:21 am

And here I sit so patiently
Waiting to find out what price
You have to pay to get out of
Going through all these things twice

Dylan wrote the TARP ballad before its time.

Koshem Bos says:

October 4, 2010 at 8:31 am

It was quite clear in the primaries that Obama is the inferior candidate; he lost all debates. He was not a bait-and-switch candidate because he did not seem promising to start with. He also won because Wall Street opened its pockets to him.

He is the first president I have seen that set his goals to leave his mark on history from day one; even Bush didn’t try it. I believe that his non-action on matters Wall Street is direct result of the money he got from them. The health care that he ended doing badly was more important to him than unemployment; at least Rahm told him to delay it. Almost two years into his term, he is yet to act massively on unemployment. That is an outrage.

A top official in a union said to me: “for most Americans Obama is the banks man; it will be a bloodbath in November.”

liberal says:

October 4, 2010 at 9:34 am

I believe that his non-action on matters Wall Street is direct result of the money he got from them.

Of course; follow the money.

craazyman says:

October 4, 2010 at 8:35 am

TARP was a success the same way slavery reform would be a success.

You outlaw certain forms of mistreatment, add limits to the severity of whipping, mandate better healthcare, and ban sales of children under the age of, say, 14 — so they can have at least some time with Mom and Dad.

That would be a big success, right?

The Preamble to the Constitution says the first objective of the task of forming a more perfect union is to “establish justice”.

Letting banksters loot taxpayers because the banksters paid for politicians’ campaigns is not justice. It isn’t even close to justice. It’s so far away from justice that it’s remarkable that any American elected official would tolerate it, much less promote it as a success.

Sadly, Franklin Roosevelt’s mojo is nowhere to be found today.

Opinionated Bloviator says:

October 4, 2010 at 8:42 am

Another Wall Street bailout, Yes we can and will. Jamie Dimon (CEO JPMorgan) stated that financial crisis WILL OCCUR every 5-7 years, so the next bailout is due ~ 2012 or so. Just in time for the presidential elections.

KnotRP says:

October 4, 2010 at 2:11 pm

> Jamie Dimon (CEO JPMorgan) stated that financial crisis
> WILL OCCUR every 5-7 years, so the next bailout is
> due ~ 2012

Bailout is a misnomer. It’s a Harvest.

i on the ball patriot says:

October 4, 2010 at 10:01 am

NEWS FLASH — JUST IN …

Profit Driven Vanilla Greed Global Crumbunism is taken well beyond the jubilee stage By Control Driven Pernicious Greed’s Mr. Global Propaganda …

The global bullshit is now chest deep and approaching the lip level of shorter participants …

They had to burn the village to save it is the latest scam variation being rerun as cover for TARP in scamerica — ‘we saved the wealthy elite and handed the people to them on a silver platter’ …

Some of the less brainwashed, noticing the reduced crumb supply at all levels globally, are beginning to wonder …

But the majority of global marks — still stuck in their nation centric state boxes and fantasy electoral systems — are taking a vicious beating …

Those not yet homeless under the bridges and still ‘employed’ are watching; football, NASCAR and sexting …

Will they wake up in time before the next staged terrorist event robs them of their only hope — the internet?

Will there be global election boycotts?

Or will they again — hat in hand — obediently and dutifully go to the crooked polls and legitimize and validate more scum bag government puppets to fuck over them one more time with more change they can believe in?

Stay tuned …

Deception is the strongest political force on the planet.

Jackrabbit says:

October 4, 2010 at 10:26 am

The Fed and the Treasury have done an excellent job replacing TARP with less visible supports so that TARP could be repaid and the Administration looks heroic.

Even the Fed audit (coming AFTER the mid-terms) will not tell the full story as many transactions were probably through third parties and support in the form of ‘regulatory forebearance’ will be not be described.

Jackrabbit says:

October 4, 2010 at 10:42 am

Its utterly amazing how MSM ignores Fed (e.g. buying assets, usurous interest rates, foreclosure docs, etc.) and Treasury support (e.g. the bloggers broke the story on how HAMP was primarily a bank support program!) .

I can only guess that it is because it is difficult to explain things like the connection between Fed support and their reader’s wallets.

Dr. Pitchfork says:

October 4, 2010 at 10:43 am

“[Geithner implies] that the choice was the program that the Administration implemented or no intervention at all. But that is bunk. There were plenty of other options for shoring up the battered financial firms; giving them generous support with virtually no strings attached, and in particular, no changes in management, was unheard of, at least outside of kleptocracies.”

Well said, Yves. Of course, not only did other options exist, they were being used at the time! (e.g. expansion of TAF to supplement interbank lending, Fed intervention in CP markets on Oct. 7, Treasury guarantee of MMF’s on Sept. 19…)
http://dailybail.com/home/washingtons-most-toxic-asset-a-yes-vote-on-tarp.html

Jackrabbit says:

October 4, 2010 at 11:52 am

While carping about the TARP, let’s not forget the government/regulatory incompetence leading up to TARP/bailouts and the cover up(s) that followed.
- Dr. Pitchfork says:
  
  October 4, 2010 at 1:30 pm
  
  Hear, hear!
  
  Obama derides the people who drove the bus into the ditch, but he hired (or re-hired) the friggin’ bus drivers (Bernanke, Geithner, Summers, Rubin…).

Jackrabbit says:

October 4, 2010 at 11:00 am

Why does the Obama administration even want to paint the TARP as a success? Bush/Paulson created TARP, right?

“TARP success” seems to undermine the message that we shouldn’t return power to those who got us into this mess. The Bush administration got us into the mess but also got us out – and maybe at a profit!?!?!?!

Spigzone says:

October 4, 2010 at 11:56 am

It’s so unfair. How can any president work with a sane, discerning and thoughtful core base with a working memory and integrity.

Curse you Progressives!!!!!

sherparick says:

October 4, 2010 at 12:59 pm

I scanned through comments just be sure no one else has posted Dean Baker’s comments on the Geithner/Obama position.

“The Cost of the TARP: One More Time
Sunday, 03 October 2010 15:07
Since some folks are determined to spread nonsense about the TARP, I suppose it’s necessary for those of us not on Wall Street’s payroll to keep trotting out the truth. The basic points of the TARP backers are:

1) it didn’t cost us anything;

2) it was necessary; and

3) Dodd-Frank ensures that it will never happen again.

Claim 1 is just absolute nonsense. We gave the banks trillions of dollars worth of loans and loan guarantees through the TARP, the Fed and the FDIC at way below market rates at the time. It is true that most of this money was paid back, so the government got back what it lent, but that does not mean there was no cost to the taxpayer.

Without TARP and the other government bailout programs, Goldman Sachs, Morgan Stanley, Citigroup, Bank of America, and many other large banks would have gone bankrupt. Their top executives would be unemployed today and their shareholders would have lost hundreds of billions of dollars in wealth, as would their creditors.

Thanks to their access to below market credit in their time of need, courtesy of the taxpayer bailouts, the Wall Street executives are still pocketing tens of millions a year and the banks are again making record profits. Had the market been allowed to work its magic, this wealth and income would have been available for the rest of society. The financial sector will continue to be a drain on the rest of the economy because the government saved it from the consequences of its own recklessness.”

http://www.cepr.net/index.php/blogs/beat-the-press/the-cost-of-the-tarp-one-more-time

Claim 2 implies that the economy would have collapsed absent the TARP. It assumes an absurd counter-factual: that the government and the Fed would have allowed the banks to collapse and then done nothing in response to boost the economy. Of course that would have been a catastrophe, but it is simply a lie to claim that our options were either doing TARP or never doing anything.

There is no reason that we could not have let the banks go down in the cesspool of junk loans that they had fostered and then flooded the system with liquidity after the fact to boost the economy. This is the serious alternative scenario — not the permanent do nothing scenario that TARP proponents have created.

Claim 3 ignores the fact that we have bigger too-big-to-fail banks than we did before the crisis. Most of the largest banks are larger today than they were before the crisis because we allowed a series of major mergers (e.g. J.P. Morgan Chase with Bear Stearns and Bank of America with Merrill Lynch) as a result of the crisis. It is very unlikely that the future regulators will be any more willing to tolerate the collapse of these giants than was the 2008 crew.

Resolution authority may give the regulators more flexibility in a crisis in the future than they had in the 2008 crisis, but the big problem was that they wanted the creditors paid off, not that they didn’t. For example, the Treasury Department/Fed made good on 100 percent of AIG’s debts, instead of trying to impose haircuts on its creditors. There is no reason to expect regulators to act any differently in future crises.

In short, the TARP opponents are absolutely right. TARP was an unnecessary giveaway to the Wall Street crew that was responsible for the financial crisis.

The only point I would disagree with Yves and some of the other comments is their belief that the President and Secretary Geithner are acting out on some secret plan, rather than a combination of long-term cognitive capture that Robert Rubin and Larry Summers accomplished/led back in the mid to late nineties. Essentially, it was Freidman/Chicago School Economics with a human face, that CEOs and corporate boards make decisions on mergers and acquisitions based on the economic efficiency of the deals. (AOL/Time Warner, CITIBANK/Travelers, etc. that have all worked out so well (NOT) for the long term investors. Yves points out how these bad ideas have worked out into bad policy, including TARP. Of course adopting bad ideas when the serve one’s, and one’s class, economic self-interest is teh most common thing in the world (See Kudlow, Larry).

mark says:

October 4, 2010 at 1:36 pm

Hey Yves, how are those bailouts for the GSE’s going? Have taxpayers seen an iota of that money back? Have creditors taken a writedown on senior debt to reflect the gaping $140bln capital hole in their aggregated balance sheet? Have managements, business practices, and strategy changed significantly?

This bailout doesn’t seem to be following the much-vaunted Nordic model either. And at least TARP has been moderately successful in getting taxpayer funds back.

F. Beard says:

October 4, 2010 at 2:00 pm

A Biblical solution would have been debt forgiveness (Deuteronomy 15, Leviticus 25) but given the nature of fractional reserve lending, a general bailout of the entire population with new debt-free legal tender would have fixed everyone including the banks.

It is still not too late but Obama had better start taking his Bible seriously.

And BTW, He did tell us so, about 3000 years ago:

“You shall not charge interest to your countrymen: interest on money, food, or anything that may be loaned at interest. You may charge interest to a foreigner, but to your countrymen you shall not charge interest, so that the LORD your God may bless you in all that you undertake in the land which you are about to enter to possess. Deuteronomy 23:19-20 (New American Standard Bible)

Psychoanalystus says:

October 4, 2010 at 2:09 pm

Yesterday, CNN was spreading it really thick about what a great deal TARP has been for chumps… oops, I meant “taxpayers”. Of course, I was rolling on the floor laughing.

And, the next piece of news on the aforementioned channel of disinformation was something about some terror scare in Europe, which they kept repeating every 15 minutes. Yeah, keep the chumps trembling in fear, maybe that way they won’t notice when the next trillion-dollar Wall Street bailout rolls out…

Psychoanalystus

Francois T says:

October 4, 2010 at 2:47 pm

In a striking phrase, Mr Geithner acknowledged at a conference in Washington last week that “we saved the financial system, but lost the country doing it”.

No Timmy, you asshole! You saved the existing banks, not the financial system. The system can still blow sky high, in no small part thanks to these non-reforms passed in the Dodd-Frank bill.

Jackrabbit says:

October 4, 2010 at 3:17 pm

So I read that TARP may “only” have cost $50b.

But then there is AIG (the last estimate I can remember was about $70b (does that include the Maiden Lane dumping grounds?) and the GSEs (mark – see above – says that is about $140b) and the increase in unemployment benefits, food stamps, drawing early retirement benefits, etc. (tens of billions), plus an unknown amount of loss from Fed purchases of mortgage securities (to be paid off the backs of bank customers, no doubt). So that totals $260b++++.

But that doesn’t include the “hit” to the real economy. There is also the financial and nonfinancial costs of lost wages (difference between unemployment and a full pay check is great), foreclosed homes (legal & admin costs plus costs of disrupted lives), and lost self-esteem, broken careers, divorces, suicides, and more. (Not to mention the blow to our nation’s standing in the world – which had already suffered from the Iraq war. And now trade imbalances are causing friction because of the vast number of US unemployed.)

And with tens of millions still unemployed or underemployed, the costs just keep mounting.

Saying “TARP was a success” is akin to saying “the operation was a success but the patient died.”.

Jackrabbit says:

October 4, 2010 at 3:25 pm

And, of course the TARP was not enough. We needed the stimulus. So add $787b (+other programs like HAMP and the recent small business initiative). Now its $1.3++++ Trillion.

chas says:

October 4, 2010 at 3:24 pm

Anyone believe Bernanke, Geithner, Obama, et al. would cease being delusional assholes when they find that there’s no groceries at their local grocery store, no gas at their local gas station & their lights go out? Nope, they’ll still be delusional assholes. Once a delusional asshole, always a delusional asshole.

Doug in Chicago says:

October 4, 2010 at 4:37 pm

And yet another example of MSM carrying water for the White House “TARP wasn’t so bad after all” spin:

http://www.npr.org/blogs/itsallpolitics/2010/10/04/130323666/the-narrative-imperative-a-glimpse-inside-the-media-mind

This one is especially rich because it claims that most of the media can’t handle this unexpected good news of TARP’s bargain basement cost. Ah but the courageous journalists at NPR will once again tell the true if unpopular story. I used to listen to NPR religiously. To say I’ve lost my faith would be an understatement.

F. Beard says:

October 4, 2010 at 6:18 pm

I used to listen to NPR religiously. To say I’ve lost my faith would be an understatement. Dough

I listened today and almost puked at the syrupy sweetness of Nina Totenberg gushing over the latest female Supreme Court appointee.

If they think a female Supreme Court judge will save US then they have learned nothing about the uselessness of cosmetic changes (eg. a black version of George Bush in the WH).

MSnDC says:

October 4, 2010 at 5:21 pm

Whatever faux pas Obama has done, he has stated succiently his displeasure with wall street, and was castigated by wall street, business groups and U S chamber of congress for doing so.
The congress has had the power to legislate the financial structure of the U S since 1789, they’re ones at fault, and its lazy journalism not to call them out.

Doc Holiday says:

October 4, 2010 at 5:44 pm

“giving them generous support with virtually no strings attached, and in particular, no changes in management, was unheard of, at least outside of kleptocracies.”

==> VERY WELL SAID!!!!

Jackrabbit says:

October 4, 2010 at 6:28 pm

The ONLY reason I can think of for TPTB to push the “TARP was good” theme is that the banks want to ensure that TARP-style bailouts remain a policy option in the future.

But TARP can not be divorced from the larger mess. The banks created a mess that was MUCH larger than their own losses. A full accounting of that mess will show that it cost the world many trillions of dollars.

RC says:

October 4, 2010 at 7:22 pm

“Whether he failed to see the opportunity, didn’t understand it, or was simply not interested is moot”

You left out “or was crooked,or sold out to the bankers for campaign contributions, etc. etc.”

required says:

October 4, 2010 at 8:50 pm

9 words explain a heckuva lot:

obama is a FR$UD

the Great American Ponzi Scam

Josh says:

October 4, 2010 at 10:56 pm

You know, I’m not a democrat. But I still think it’s unfair that the current president always serves as a reflection of their respective parties. Democrats are not the apathetic thing that Obama makes them look like. In fact, they have some great ideas for how to turn this economy around as well as the Republicans. It’s all the bureaucracy caused by the disdain the parties have for each other’s policies that makes things stay stuck in the mud.

Hermann Wilhelm Göring says:

October 4, 2010 at 11:29 pm

Geithner is trapped inside a Nazi-like puzzle; he thinks he’s helping his country by giving excessive amounts of money to highly corrupt and evil bankers … anyone know how this turns out?

Hugh says:

October 5, 2010 at 12:42 am

Came late to an iteresting thread. I think killben at 6:45 AM nails it. The Fed bailout was much larger than the TARP. Banksters faced not being able to pay themselves outrageous bonuses for wrecking their institutions and the wider economy so that those who could left the TARP as soon as they could. They did this by a variety of schemes, some stock offerings, cooking the books even more, but mainly I think redirecting and laundering funds through their institutions borrowed at or near ZIRP from the Fed.

Any honest assessment of the TARP would have to take into account and cost all these other backdoor bailouts.

Also it gets lost in the discussion but the TARP was orginally set up to buy up crap assets from banks through a reverse auction process. The rationale behind this supposedly was that this would discover the price of those assets. As some of us pointed out at the time, this was logically goofy: Since to make the auction process work you would have to have a reasonably good idea of what the crap assets were worth and if you did, then the reverse auction was superfluous for price discovery because you already knew what the price was. I think this was the real reason the reverse auction notion failed. Treasury had a good idea of what the dreck was worth and if this in fact was the price used, it would have demonstrated that the banks were insolvent.

Also the Fed was buying up in a much bigger way the crap, and at much higher prices. So suddenly they had $700 billion, the loot from Paulson’s smoking gun BS, and nothing to spend it on. So they went back through the legislation and found this minor amendment allowing for loans to banks, and the TARP as we knew it, $700 billion (split between Republican and Democratic Administrations) in carrying around money, was born.

Psychoanalystus says:

October 5, 2010 at 12:44 am

In reference to attempter’s comments above:

Obama is a textbook narcissist. His pathology is more than obvious. Everything about him supports that. However, psychoanalytically speaking, like any other narcissist, he is a very weak man. An impotent coward with no principles. The narcissistic facade is always just that: a facade to cover the weakness and imporence of the narcissist. It is this weakness that led him down this path of serial compromises and betrayals of the American people. Obama’s developmental history (i.e., abandonment by his father) is indicative he is highly damaged psychologically, which created this diagnosable Narcissistic Personality Disorder in him with which he is stuck for life (personality disorders cannot be undone). I could go on, with lots of classical and established psychological research to support what I wrote above.

In essence, if there is one thing to fear about Obama is his weakness and utter impotence as a leader. This makes him at least as dangerous as W.

Psychoanalystus

mpinco says:

October 5, 2010 at 12:51 am

“….The TARP was created by the Bush regime; why not distance yourself from it or deploy it differently? ….”

Ah, TARP was created by Geithner, Paulson and Bernanke. One cannot ‘distance’ oneself from one’s creation. TARP is as much a product of the Obama administration as it is the Bush administration. In fact much of today’s policy originated at the NY Fed that IS the Obama administration.

Opinionated Bloviator says:

October 5, 2010 at 2:22 am

By 2012 no Wall Street banker will be without a bailout and all americans will have a choice of bridges to sleep under.

Richard Kline says:

October 5, 2010 at 4:58 am

So Psychoanalystus, I am highly dubious that Barack Obama has a personality disorder, specifically a narcissistic structure. I wouldn’t say that I’ve followed his career in detail, but I do have significant familiarity with this form of psychopathology, and I don’t see it. Nor is it subtle really, especially for one so well reported as him. A good example of a narcissistic personality disorder? Newt Gringich. The man’s got it in spades. Now compare the reported behaviors of the two. _Not_ similar. Obama is a garden variety politician, and in addition a very weak man. His talent is ‘presentation,’ and he’s shrewd, but that’s it.

Regarding Obama’s reported hitting the books on Great Presidents Past, I took this as flashing danger signal, and I regret to have been proven correct in my concern. And I say that as a strong advocate for historical comparison and education.

There are two aspects to going through such case studies of past presidents, considering how they tackled specific issues and considering how they ran their shops. Both are relevant for us observers but neither are terribly relevant to an officer elect. Most political executives have to play the cards in the hand they’re dealt; that is, they spend a lot of time reacting to situations thrust upon them. Thus studying the situations thrust upon, say, James Knox Polk, has little relevance for some dude named Barack because he will be dealing with a substantially unique problem set, and his success or failure will come from how he contends with that unique problem set. ‘Studying’ how past presidents ran their shops can be useful, but is no substituted for actual experience, there’s the rub. The workload of a political executive is very hands-on.

The capacities involved are an ability to make a deal with difficult people; the ability to define and deliver (at least) the minimum of one’s core constituencies (or to persuade them to accept a substitute you deliver instead); the ability to select an appropriately talented managerial core group (because governance takes a lot of delegation and support work); and sufficient charisma to persuade the audience that you’re an asset to them. An ability to spin the situation to reflect well on oneself is a plus in the short term, but a huge minus if disengaged with mid-term outcomes [pun accepted if not the point here]. A handful of folks will be able to develop those talents in a sink-or-swim, first-time situation; those are very, very able people, and I might add very lucky ones as well. For most, prior experience and the repetitions involved are crucial to getting ones game up to speed. The day _after_ one is elected to high political executive office is far, far too late to be boning up on Governance for Dummies is part of what I mean, here.

Well, Barack Obama had no prior experience, and we see how well that worked. Of the four (at least four) executive attributes desirable, he possess only the last of them, the charisma to seem a paladin (not that he is). Obama does NOT seem able to do a deal, instead surrendering as fast as possible to any opposition: he’s a weakling and a coward without principle. Obama doesn’t have any interest at all in delivering for his core electoral constituencies; he just couldn’t care less. He does try to deliver for those he perceives as the powers that be, but, as per point one, he’s craven, a lacky, and doesn’t do a deal, so he gets little credit and less sucesss. Obama has been a flop on collecting a talented managerial core: his team didn’t deliver, for him, or us, and their curriculae vitae and personalities made this fully evident from the days they were selected. I’d go so far as to say that Obama seemed to deliberately banish those of any real capacity, something for historians to chew over. As far as being a spinmeister, well some of his team put a lot of effort into that, but Obama is oddly disengaged, his heart isn’t really in it. The guy seems to think he should get an A for being a credit to all that is right, performance is for other joes, and if that isn’t the definition of a mook it’ll do until a better one comes along.

As a political executive, he’s a failure. Maybe not a gross failure, but then again given the tremendous advantages he was given starting out, he’s achieved less with more than anyone in recent memory. Which is why his tenure is going to be a one-off.

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