Obama No Longer Bothering to Lie Credibly: Claims Financial Crisis Cost Less Than S&L Crisis

I’m so offended by the latest Obama canard, that the financial crisis of 2007-2008 cost less than 1% of GDP, that I barely know where to begin. Not only does this Administration lie on a routine basis, it doesn’t even bother to tell credible lies. .And this one came directly from the top, not via minions. It’s not that this misrepresentation is earth-shaking, but that it epitomizes why the Obama Administration is well on its way to being an abject failure.

On the Jon Stewart Show (starting roughly at the 1:10 mark on this segment) Obama claims the cost of this crisis will be less than 1% of GDP, versus 2.5% for the savings and loan crisis (hat tip George Washington, sorry, no embed code, you need to go here):

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The reason Obama makes such baldfacedly phony statements is twofold: first, his pattern of seeing PR as the preferred solution to all problems, and second, his resulting slavish devotion to smoke and mirrors over sound policy.

The savings & loan crisis led to FDIC takeovers of dud banks and the creation of a resolution authority to dispose of bad assets. That produced costs which were largely funded by the Federal government. I’ve heard economists repeatedly peg the costs at $110 to $120 billion; Wikipedia puts it at about $150 billion. This approach, of cleaning up and resolving banks, has been found repeatedly to be the fastest and least costly way to contend with a financial crisis.

The reason Obama can claim such phony figures is that many of the costs of saving the financial system are hidden, the biggest being the ongoing transfer from savers to banks of negative real interest rates, which is a covert way to rebuild bank equity.

The Obama Administration is also engaging in phony accounting on its expected TARP losses, the latest sleight of hand being magically reducing its expected losses from AIG by $40 billion through a reclassification process. But the biggest source of his false accounting is extend and pretend. The biggest banks are carrying second/junior mortgage portfolios at huge premiums to their real values, which is close to zero. Merely marking the seconds down to something a tad more realistic would easily create $150 billion of losses to Citigroup, JP Morgan, Bank of America, and Wells, in a worst case scenario, much more

$150 billion happens to be over 1% of GDP. And that’s before you get to the writedowns smaller banks need to take. Since the big banks have just under 50% of the total market for seconds, you can double that to $300 billion. Now of course, not all of those losses would necessarily lead to a government rescue, but the odds are high a big percentage would, if not in explicit rescues, then via continued hidden subsidies which ultimately do come out of our collective hide.

Then we get to the fact that regulators are engaging in other forms of regulatory forbearance (finance speak for letting them cook their books), plus asset values are generally artificially high due to near zero policy interest rates. So we have what amount to baked in losses if rates ever get back to something resembling normal levels.

And that’s before we add in the costs of yet another aspect of the financial crisis, the failure to come up with a decent mortgage mod process. If the powers that be had been willing to resolve and restructure the debt of homeowners who could have been saved, ironically, the widespread failing of the mortgage securitization process might never have come to light. But we are now instead having a slow motion train wreck in the biggest asset class in the world, US residential mortgages. Anyone who thinks this isn’t going to result in a real toll on the balance sheets of the biggest banks is unduly optimistic. Banking industry experts Josh Rosner and Chris Whalen each expect another bailout in the not-terribly-distant future. So add more to the ultimate cost of the financial crisis.

But Team Obama is no doubt rationalizing this chicanery: if they can keep from recognizing losses until the recovery takes place, then the ultimate damage will be lower. But Japan’s post bubble record shows that doesn’t work. You simply don’t get a recovery with a diseased financial system. You need to purge the bad assets, only then will meaningful growth resume.

And if you want a better tally of the true costs of the financial crisis, the Bank of England’s Andrew Haldane comes up with much greater damage, precisely because he also considers the costs citizens know all too well, such as painfully high unemployment and drastic state and local government budget cuts. He estimates the cost of the global financial crisis, when you include the biggest item, output losses, at one to five times global GDP. And remember further, because a lot of bad US assets, like mortgage securities and CDOs, were sold overseas, the US did not bear the full costs of the toxic product we created, again undermining Obama’s phony accounting:

….these losses are multiples of the static costs, lying anywhere between one and five times annual GDP. Put in money terms, that is an output loss equivalent to between $60 trillion and $200 trillion for the world economy and between £1.8 trillion and £7.4 trillion for the UK. As Nobel-prize winning physicist Richard Feynman observed, to call these numbers “astronomical” would be to do astronomy a disservice: there are only hundreds of billions of stars in the galaxy. “Economical” might be a better description.

It is clear that banks would not have deep enough pockets to foot this bill. Assuming that a crisis occurs every 20 years, the systemic levy needed to recoup these crisis costs would be in excess of $1.5 trillion per year. The total market capitalisation of the largest global banks is currently only around $1.2 trillion. Fully internalising the output costs of financial crises would risk putting banks on the same trajectory as the dinosaurs, with the levy playing the role of the meteorite.

But unlike the UK, where regulators like Mervyn King, Haldane, and Adair Turner routinely say things that bear a pretty solid resemblance to the truth, in the US, trying to manipulate appearances in the hope outcomes will follow is the norm. In the 1960s, when the media realized that president Johnson was regularly telling whoppers, the expression “credibility gap” was born. While the press is giving Obama a free pass on his strained relationship with the reality, he is no more likely to succeed in the long run than LBJ did.

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  1. Neil D

    Can you blame him, really, for lying? The American people have a clear preference for financial fantasy over reality. Hence, we believe that housing prices always go up, that the nice man at the bank is, well, nice, and that our neighbor being foreclosed upon is an innocent victim of that formerly nice man at the bank.

    I’ll admit to succumbing to the hope and change meme a couple of years ago. I thought there was a moderate and sensible middle in America. The financial disaster of the last 4 years has proven that to be an illusion. Perhaps there are innocent victims in this crisis. I guess I haven’t met any yet. There is always the sense of hubris and that preference for fantasy getting in the way.

  2. M.InTheCity

    I think what disturbs me the most is that somehow all of this is about confidence. The only way to get real confidence (not this “and the stock market is going up, so we have confidence” nonsense) is to actually have some bottoming of the economy. People on the street are certainly not feeling that way now. At least not in the UK – and from what I can tell with friends in the US, it is the same.

    Just to illustrate: I was at a retreat this weekend and out of the 10 people who work in the UK, 6 were having problems with either a) getting a crappy job, b)getting a job that they trained in (but they still have their crappy and soon to be crappier job), or c) being in danger of losing their job/wage & benefit cuts. How the hell can anyone have confidence when that sort of thing is happening to that many people? Those people are middle class and many of them with degrees or better. It’s like a slap in the face when someone says that really, everything is fine.

    1. DownSouth

      Under normal circumstances the liar is defeated by reality, for which there is no substitute; no matter how large the tissue of the falsehood that an experienced liar has to offer. It will never be large enough, even if he enlists the help of computers, to cover the immensity of factuality. The liar, who may get away with any number of single falsehoods, will find it impossible to get away with lying on principle. This is one of the lessons that could be learned from the totalitarian experiments and the totalitarian rulers’ frightening confidence in the power of lying—-in their ability, for instance, to rewrite history again and again to adapt the past to the “political line” of the present moment or to eliminate data that did not fit their ideology…

      The results of such experiments when undertaken by those in possession of the means of violence are terrible enough, but lasting deception is not among them. There always comes the point beyond which lying becomes counterproductive. This point is reached when the audience to which the lies are addressed is forced to disregard altogether the distinguishing line between truth and falsehood in order to be able to survive.
      –Hannah Arendt, Crises of the Republic

      1. Nathanael

        You know, we actually passed that “distinguishing point” under the George W. BUSH administration, some years back.

    2. Externality

      “During times of universal deceit, telling the truth becomes a revolutionary act.” – George Orwell, _1984_

  3. Ina Deaver

    Yves, I think that the real reason is a good deal simpler: his self-identity is based on believing the lie, and so is that of the people who speak to him and whom he trusts. What we all see so clearly is a lie to him, because his vantage point is completely different – and because the type of person who is willing to take on this job is not able to believe that they are making fundamental mistakes.

    But what I did note is how QUICKLY he claimed to have been using the pun consciously when he was called on saying Larry did a “heck of a job.” To use that idiom on purpose, he’d have to be slapping Larry Summers in the face: in effect, he’d have to be saying that he torpedoed his administration and pointed out that we’re now a hollow power. Naturally, Summers is Obama’s Brownie: but do you believe that Obama REALLY would say that on purpose, or as a joke even? We’re watching him morph into the Shrub before our very eyes.

    1. monday1929

      He does seem to be losing one IQ point per week. I did give up on him when Summers and Taxcheatgeithner were selected.

      1. Nathanael

        Seriously, I wish this meme would die. I looked into it, and Geithner’s tax errors were the sort which anyone who didn’t have a very, very expensive accountant would make (Geithner did his OWN taxes by HAND) — do YOU know how to account for income from UN agencies? (Hint: nothing on the IRS website, the Social Security website, and the UN website will give you the correct answer.)

        Geithner’s done an awful job and has been completely controlled by the banksters. But he’s not a “tax cheat”.

    2. Jackrabbit

      Clearly he tried to cover his mistake with the pretense that it was some sort of joke but his sudden realization that what he said was a goof-up led him to second goof-up.

      What strikes me is the immediate inclination to cover. Why not simply say: “oh, that’s a poor choice of words, isn’t it? hehe.”

      This is not peculiar to Obama. It is the nature of our politicians today.

  4. bob

    Fuck Stewart. He couldn’t even bring himself to say “single payer”.

    Very disappointed, especially at the lack of comedy.

      1. M.InTheCity

        Not surprised by Stewart at all. He is always VERY deferential to those in power when they come on his show. He is only tough (and/or funny) when they are out of power.

        1. Chris

          That’s because in the Land of Television, ratings rule. It’s not everyday a host gets Obama on his show, so naturally he’s going to go at it with kid gloves. Otherwise, Obama wouldn’t be back and neither would any DNC stooge.

        2. Nathanael

          This is because Stephen Colbert exists to be hard on people when they’re on his show. Jon Stewart is trying to get people who won’t go on Colbert.

    1. i on the ball patriot

      Lackey sell out rich boy ASSHOLE Jon Stewart has always been a shill for the hijacked system. That so many view him as an ally and a champion is testimony to the power of Mr. Global Propaganda and the Aggregate Generational Corruption of the rich.

      I wonder if any Nazi comedians helped Hitler gloss over the numbers of those being driven to the death camps …


      Deception is the strongest political force on the planet.

      1. Antifa

        The function of a liberal intelligentsia in an oligarchy is to allow for blowing off steam. To laugh at the foibles of politicians pandering wholeheartedly to the obvious greed of bankers is to feel better instantly.

        The bankers and politicians go right back to work the next morning. You do, if you have a job.

        They really are laughing all the way to the bank.

        We, the people, need to stop laughing at all. This is life and death. This is for all the marbles.

  5. Lynda Scott

    When I was out doing my errands yesterday I spoke with an acquaintance about “preparing”, everything I was reading told me a bank holiday might come next year & that she should buy foodstuffs & have some cash in the home & that OBAMA knew exactly what was coming & that he is really just an enforcer for the banking system ……….. I kid you not, this person is no longer my friend now. As I was telling her my thoughts, I could see that she was getting LIVID !! at ME !! p.s. I am a 60 year old white lady & she is about 50 years old, black lady. Many people do not want to hear it.

  6. dcb

    Interesting that the guy who campaigned on an honest dialog has turned out to be a bigger liar than Bush. maybe the most since Nixon. it is a chronic problem
    It is something out of the rowe playbook. just keep saying the lies, the press reports it because it comes fr0m an official. you saw it on the build up to the iraq war.
    worse the lessons of the iraq war and the use of the press remains inlearned by the press that continues to be used.

    lets face it we are in a 1984 propaganda machine with banks owning the country, the media (being all big business) goes along. People don’t want to recognize we have become a facist state. Before you go crazy with the term, please look it up.

    1. liberal

      “Interesting that the guy who campaigned on an honest dialog has turned out to be a bigger liar than Bush.”

      BS. All the elites lie about government policies that shovel money to the banks, their shareholders and bondholders. Obama isn’t any worse or better in that regard. Bush, in addition to the usual lying about our so-called free market in finance, lied about Iraq, leading to a grotesque criminal invasion.

      Not to exculpate Obama. But he’s certainly no G. W. Bush when it comes to lying.

      1. M.InTheCity

        I don’t know – after all, Bush was very very honest about wanting to go out and kill people. He loved it and was honest about it in a very cowboy manner (i.e bloodthirsty). Obama? He talks around it/is vague/ insinuates, but like Bush is ordering people’s deaths and by virtue of Bagram airbase just as implicated in torture.

        1. liberal

          Main point is that Bush implied Saddam was a live threat to the US, and he had his people jigger the intelligence, not to mention outrageous nonsense about ties between Saddam and Al Qaeda.

          Nothing Obama’s done comes close to that.

        2. Fractal

          You are quite right, M. “Obama … like Bush is ordering people’s deaths and by virtue of Bagram airbase just as implicated in torture.” I think he luvs his airborne predator drone missile assasinations. He is a ruthless killer and spineless when it comes to prosecuting torturers & war criminals. Maybe we want him to be a killer, since those AfPak Taliban & Quetta Shura & Al Qaeda sons of bitches are definitely bad gangsters.

          Obama is not a man of peace he’s all “shoot-first ask-questions-later” when it comes to alleged terrorists.

      2. Cedric Regula

        He is starting to develop that same vacant smile that Bush had whenever Bush looked into a TV camera. And it is only two years into his term.

      3. Progressive Ed

        Exactly. See “Liberal Fascism” by J. Goldberg for a historically oriented study of the philosophical identity of Progressivism (USA) and Fascism (Europe).
        In a nutshell: “Big Brother Loves You”…..and you better trust him or else.

        1. Nathanael

          Or, don’t read a book which is intellectually completely dishonest, and where none of the footnotes check out. Goldberg is simply part of the Republican propaganda operation, and like they usually do, he always accuses liberals of whatever Republicans are doing. Which means….

          If you want some understanding of the connections between fascists and “moderates” — and I think we all know that Obama is a “moderate” — look up the “Centre Party” of Weimar Germany.

      1. Doug Terpstra

        Yves freezes Obama with a slightly awry smile (vacant as Cedric says. Usually, Obama effects a convincing smile the way a good actor does, ‘feeling’ from the diaphragm that what he says is true, the way sociopaths or trained agents foil polygraphs by temporarily believing their own lies. But for most of us, insincerity is betrayed in the subtle micro expression framing the eyes and in the pupils (which you can’t see here). Cover just the smile here, and the eyes seem to betray something else.

        I’m reading in a lot, but IMO, reality here is too intrusive for Obama to smother effectively, and the “heck of a job” Summers slip was a related verbal “tell”. A 1% hit on GDP (implying our entire economy)—while a third of homes are underwater in the foreclosure swamps, real unemployment is at 20%, and wars rage without end—is simply too grossly distorted for the Kool-Aid effect.

        I actually felt sorry him in these clips. I suspect he’s playing at something similar to Madoff—if we can buoy confidence long enough while pumping counterfeit cash into banks and stocks, maybe the engine will catch and we’ll get lift-off before the cliff edge. I think fear is taking hold a week before the election.

    1. Nadai

      Or alternatively, that the President has chosen poor (I would personally say evil) advisors. It isn’t as if Obama was simply saddled with these people and can do nothing about their presence.

    2. AnastasiaBeaverhausen

      His leadership style is no different then when he was a junior senator nor is it different then when he was President of the Harvard Law Review. He was just as wishy washy then as he is now. So all the blame points directly at him and not solely his advisers.

      1. Nathanael

        Yeah. Why did we have to go from “outright full-throated support of thieving” (under Bush/Cheney) to “wishy-washy half-hearted kinder and gentler thieving”?

        There are some excellent Democrats running for the House of Representatives. (And some terrible ones.) The good ones are not helped by Obama’s “Bush lite” policies.

  7. skippy

    It is sad…to consider…that the Presidency has devolved in to a condition of…stage orator on the Price is Right.

    Skippy…please spade your pets…cough deadbeat home owners!

  8. liberal

    “And if you want a better tally of the true costs of the financial crisis, the Bank of England’s Andrew Haldane comes up with much greater damage, precisely because he also considers the costs citizens know all too well, such as painfully high unemployment and drastic state and local government budget cuts.”

    I agree that it’s necessary to look at those costs, and think that Obama’s a shill, banksters should be swinging from lampposts, etc, but if we’re going to make an honest comparison with the S&L crisis, the indirect costs should be tallied for the latter, too.

    Of course, even without doing a calculation, it’s obvious that the current crisis has much larger indirect costs than the S&L crisis, since it’s so much broader and deeper. But it’s useful to strengthen the argument in anticipation of attempts at refutation by the apologists for the bankster scum.

    1. Fractal

      “Of course, even without doing a calculation, it’s obvious that the current crisis has much larger indirect costs than the S&L crisis, since it’s so much broader and deeper. But it’s useful to strengthen the argument in anticipation of attempts at refutation by the apologists for the bankster scum.”

      Well said, very thorough. This is the part of virtual organizing– PLANNING — that does have real-world consequences even though it takes place in the virtual world. Most other blogging is not ACTION and will not cause CHANGE unless we get off our asses, as rossmoyer said at 10:39 am.

  9. Rodger Mitchell

    All the “cost” discussions are phony.

    When talking about the “cost” of the crisis, you have to be clear about what is a cost and who has been cost. It’s the same debate about what Madoff “cost” people. Some say it was $50 billion. Others say that’s a phony figure, because about $35 billion never really existed in the first place.

    Similarly, when the price of a million dollar home falls to $800 thousand, did that $200 thousand really exist? And for the government there is no cost, because the government creates unlimited money. It’s like asking what it “costs” the sun to heat the earth.

    The real “costs” can’t be measured: What is the “cost” of a destroyed family? A destroyed business? Lack of medical care?

    Rodger Malcolm Mitchell

    1. tar, etc.

      –The real “costs” can’t be measured: What is the “cost” of a destroyed family? A destroyed business? Lack of medical care?–

      Hear, here. Those are the real costs. The cost is our very survival as a nation. Do we still have a rule of law, confidence in the choices presented by elections, or honest and full-ranging debates in the public square, aka television? Our economy has been nuked. No one has even begun to tally the costs.

    2. liberal

      Similarly, when the price of a million dollar home falls to $800 thousand, did that $200 thousand really exist?

      That’s a valid point. However, asset price bubbles do lead to extremely large misallocations of capital and labor. Leading examples for the recent bubble include overbuilding houses, distortions from people treating their homes as ATMs, etc.

  10. DownSouth

    Yves said: “But unlike the UK, where regulators like Mervyn King, Haldane, and Adair Turner routinely say things that bear a pretty solid resemblance to the truth, in the US, trying to manipulate appearances in the hope outcomes will follow is the norm.”

    The greatest significance of Adam Smith to the economic history of the world was not in any power of economic explanation but in offering a “scientific” doctrine by which the many losers from all this radical change could be persuaded to accept their fate without active revolt—-an act of rebellion against the market that in many cases might have been to their individual advantage.


    Samuelson did introduce some new dynamic complications in his “Foundations” and did achieve some elegant theoretical results, but the revolution in economic methods that his work promoted turned out to be pretty much the old economics in the mold of Newton. Moving beyond Adam Smith and his followers, however, the vision of the market was now presented for the second half of the twentieth century in full mathematical dress—-Adam Smith in a complete set of equations, one might say.


    The economist Philip Mirowski has been one of the severest critics of what he characterizes as the “physics envy” of the economics profession throughout the modern era. He delivers an especially harsh verdict of Samuelson, describing him as virtually a scientific fraud. Mirowski writes that “the key to the comprehension of Samuelson’s meteoric rise in the economics profession was his knack for evoking all the outward trappings and ornament of science without ever once coming to grips with the actual content or implications of physical theory for his neoclassical economics.”


    It was embarrassing to Samuelson and his followers that the neoclassical models had their “origins” in “nineteenth-century physics” (or even seventeenth- and eighteenth-century physics). Hence, it was necessary to “disguise” this fact and adopt “superficial references to twentieth-century physics while simultaneously avoiding their characteristic formalisms and content.” Mirowski finds that the making of claims to “scientific legitimacy by means of value innuendo abounds in Samuelson’s oeuvre.” Yet, in a profession anxiously seeking the social legitimacy of the physical sciences, fellow economists suspended their critical judgment, and even though the efforts to emulate physics represented “a tough act to get past the critics,…Samuelson pulled it off time after time,” along with a large supporting cast made up of other economists of his generation.


    The Newtonian manner of understanding the economic system had already failed as an explanatory model in the nineteenth century when the real world processes of industrial change hardly fit an economic image of harmony and stability.


    To be sure, economics may perform a valuable social role without adding any significant understanding to knowledge of the economy—-a “good myth,” economically speaking, can work not only in primitive tribal cultures but also in modern sciences. In this respect, Samuelson might be judged a large scientific failure and a great religious and economic success (at least until the basic value shifts in American society from the 1960s onward). Economists can be valuable contributors to economic efficiency and progress—-likely to be given positions of high respect in society—-in the role merely of the latest class of priestly believers of authoritative blessings. As long as it is believed in (whether or not it is “true” is not essential), religion offers a common bond that can help to promote trust and to resolve the various large transaction-cost problems with which any real-world economy must contend.

    Indeed, as in the analysis of this chapter suggests, the religious function may have been the most important role throughout the history of modern economics since the Enlightenment. For thousands of years all over the world, most societies have assigned a leading role to their priestly classes, and yet we would now judge that the great majority of these priesthood have been mistaken in their preaching of objective truth…


    The Western tradition of religion, however, is that it should be “the truth.” The truths of science displaced the truths of Judeo-Christian religion in many domains because science was able to make more authoritative claims to genuine knowledge. It will not be enough to say that a religion should be believed because as a practical matter it will “work”—-whether the goal is promoting economic efficiency and rapid growth or any other social objective. Indeed, as argued earlier, the proselytizers of the various secular economic religions of the modern age have claimed a genuine scientific status. These economists were asserting that economic theories could deliver the same access to “truth” in the economic world that other scientific efforts were achieving in matters of the workings of physical nature.

    In short, any old religion may do for economic purposes, as long as it is truly believed in and supports the market and other economic institutions, but a religion will not be believed in unless it can successfully assert a truth claim about the world.
    –Robert H. Nelson, Economics as Religion: from Samuelson to Chicago and Beyond

    1. Michael Fiorillo

      Down South’s comment on the undue respect granted to the pseudo-science of economics is apt, and needs to become part of the overall discourse.

      In 1964, Norbert Weiner, a mathematician and the man who coined the prefix cyber, published a short book entitled “God & Golem, Inc.:A Comment on Certain Points Where Cybernetics Impinges on Religion.”

      Towards the end of the book he writes, “The success of mathematical physics led the social scientist to be jealous of its power without quite understanding the intellectual attitudes that had contributed to this power. The use of the mathematical formulae had accompanied the development of the natural sciences and become the mode on the social sciences…so the economists have developed the habit of dressing up their rather imprecise ideas in the language of the infinitesimal calculus.”

    2. Paul Tioxon

      “According to the U.S. Department of Defense, during the four decades from 1947 through 1987 it used (in 1982 dollars) $7.62 trillion in capital resources. In 1985, the Department of Commerce estimated the value of the nation’s plant and equipment, and infrastructure, at just over $7.29 trillion. In other words, the amount spent over that period could have doubled the American capital stock or modernized and replaced its existing stock.”

      The fact that we did not modernize or replace our capital assets is one of the main reasons why, by the turn of the twenty-first century, our manufacturing base had all but evaporated. Machine tools — an industry on which Melman was an authority — are a particularly important symptom. In November 1968, a five-year inventory disclosed (p. 186) “that 64 percent of the metalworking machine tools used in U.S. industry were ten years old or older. The age of this industrial equipment (drills, lathes, etc.) marks the United States’ machine tool stock as the oldest among all major industrial nations, and it marks the continuation of a deterioration process that began with the end the Second World War. This deterioration at the base of the industrial system certifies to the continuous debilitating and depleting effect that the military use of capital and research and development talent has had on American industry.”

      Nothing has been done in the period since 1968 to reverse these trends and it shows today in our massive imports of equipment — from medical machines like proton accelerators for radiological therapy (made primarily in Belgium, Germany, and Japan) to cars and trucks.

      Our short tenure as the world’s “lone superpower” has come to an end.

      From: Bankrupting the American Republic: The Permanent War Economy and Soaring Deficits

      Chalmers Johnson


        1. Paul Tioxon

          Military families have a clear eye to what is and what is not the role of war in the world, especially in today’s nuclear world. As one who owes his life to the military, being born in a US Naval Hospital in S Philly, whose parents were married at the US Naval Chapel in the Brooklyn Navy Yard and who grew up shopping at the Naval PX at the Naval Depot, where my mother worked for 39 years, I can see the military is now little more than cannon fodder during various and sundry conflicts and the money spent on defense has not spared us from 9/11, drug cartel decimating our major cities or my favorite total waste, 11 nuclear air craft carriers that can not defend us against anything. Since Yamamoto is no longer steaming towards San Francisco, I feel absolutely rigid in that position.

          Permanent war, why yes, the dangers of N Korea? Fear of Castro, Chavez? Chavez? What, no more coffee? Protecting our interests in the Middle East from who? We have developed supersonic jets that fly too high and too fast to be of any military use, since no one in the world has avionics that even remotely approaches their dog fighting pyrotechnics. Maybe we are ginning up a civil war where we can fight ourselves. Now, you are making me think really scary thoughts.

          The defense budget is our Keynesian government hedge against collapse of demand in the private sector. So it must have a perpetual boogie man. Shocked and appalled by the collapse of the galatically corrupt Soviet System, a new foe had to be found by elites before the citizenry figured out that the peace dividend was real and the commercialized internet with all its ancillary businesses would displace everything in its path. Too much capital reinvested in America would go to civilian uses and not satellite controlled ground forces, and that would just be a waste of perfectly weaponized technology. It would also mean the eclipse of the newly enriched but woefully uneducated sunbelt. You see, a 21st century world would go the way the leaders most heavily invested in advanced research capacity, the dreaded North Eastern Elites and CA. They have superior matriculated numbers and would always outpace the states that have historically refused to invest in education like they love to invest in Guns, Nukes, and Heavy armaments via the federal budget.

          1. DownSouth

            “We are going to present you Americans with a terrible dilemma. We are going to deprive you of an enemy.”
            –Mikhail Gorbachev

            “Not to recognize that our policies have succeeded and that we have won the cold war is the kind of blindness that cannot take yes for an answer.”
            –Daniel Yankelovich

          2. Nathanael

            “The defense budget is our Keynesian government hedge against collapse of demand in the private sector.”

            And yet military spending has the WORST economic multiplier of practically anything studied, and is therefore terrible for Keynesian purposes.

            Possibly the only thing worse is tax cuts for the rich, which some studies indicate may have a NEGATIVE multiplier.

    3. jake chase

      The last scientific economist was Veblen. He was an anthropologist. Read The Theory of Business Enterprise, not just Theory of the Leisure Class.

      Incidentally, Keynes was not a Keynesian.

    4. Nathanael

      And yet Adam Smith was smarter than his worshippers. He warned about monopolies and about the eternal tendency of businessmen to attempt to cheat their customers, mistreat their workers, and drive their competitors out of business.

      He recognized that the market could eliminate SOME of this by making such businesses fail, and that’s actually one of the contexts where he praises the “invisible hand”… but he also recognized that monopolies and cartels needed to be broken up or the market couldn’t do anything, and that honest competitors needed to be protected from sabotage.

      Does anyone doubt that the megabanks are acting as a cartel? I don’t.

  11. Timmy

    Is there any chance that the MBS investors’ political clout could grow to challenge the political clout of the banks? According to this article, a group of investors who control $600 billion in MBS are preparing to sue the banks:


    $600 billion is a pretty large chunk of change and presumably the investors could make political contributions on par with the banks. Combining those political contributions with populist anger against the banks may be enough to turn some (many?) politicians against the banking industry. At least, that’s what I hope will happen.

    It’s interesting that the one wikipedia page (Reagan administration scandals) puts the cost of the S&L bailout at $150 billion while the ‘Savings and Loan Crisis’ wikipedia page (see second paragraph under ‘Failures’ @ http://en.wikipedia.org/wiki/Savings_and_loan_crisis ) states that $150 billion is the amount of mortgage bonds that S&Ls were holding in 1986 when the crisis hit.

    Further, if I’m reading the S&L Crisis wikipedia page correctly, the chain of ownership back then was:
    S&L originates mortgage loan –> Wall Street buys loans from S&L –> Wall Street repackages loans as government-backed bonds and sells back to S&Ls.

    In today’s crisis, the chain is:
    loan originator –> Wall Street –> investor

    The investors and MERS are the new wild-cards in this crisis. They investors could have just as much political clout as Wall Street if they band together and they would have the populist anger at Wall Street on their side as well.

    1. emca

      I sure hope the investors group looks after their own interests, Goldman government has and is not going there.

  12. darkmatter

    did anyone think of freddie and fannie who are hiding wounded in the corner ready to emerge at any moment looking for a multibillion dollar bandaid?


    I guess that if you’re into watching “The Real Douche Bags of Washington D C”, you’ll believe anything… Anyway you look at it Obama has been a great disappointment… It’s too bad that the administration and the democrats took the path they did, they had the greatest opportunity to build this nation back up and they blew it, by design….

  14. jake chase

    All discussions concerning ‘cost’ of the financial collapse are phony. We are living through the wholesale destruction of law, equity, morality, accountability. We now have government reduced to entertainment and Obama is the Entertainer in Chief. For those possessed of modest accumulated assets, the cost will be confiscation. For those with developed skills, the cost will be redundancy, irrelevancy. Propaganda has become our only growth industry. Anyone who still believes in either Democrats or Republicans is a deluded fool. Can anything be done about this process short of physical confrontation with organized authority? Doubtful.

  15. Paula

    I believe the president was correct. He was talking about the actual cost to the taxpayers.

    Maybe you people should look at other sources, other than Fox.

    1. M.InTheCity

      I wouldn’t throw the Fox News strawman at Yves. I think Fox News would be the last place to run this kind of analysis. Just because Yves is calling out Obama, doesn’t mean she’s a terrible Republican who’s trying to tear down all the “good” Obama has done. I think this is disappointing because he has sold himself differently, but he really is not telling the truth in that interview.

      If you ever get the chance to read Yves’ book or meet her in person, you will know she pretty dang good at getting to the heart of the matter in the most honest way. Nobody is perfect, but I’ll believe Ms. Smith before any politician (left/right/whatever).

      1. Neil Anderson

        *jerks thumb upwards*

        What he said. I reckon very few people who comment here will be pro Bush or the current shower, but we are not voting here, we are trying to get to the truth. And Obama is definitely being disingenous, disappointing as he does (did may be more apt) seem a very decent and very bright man…

    2. svsm

      Well that’s amusing. I have no love for the propaganda channel and I think the GOP, if they regain power, will give the banks anything they want. They are campaigning on complete repeal even the tiny bit of financial regulations that they managed to pass. They call consumer protection socialism. Fox will never cover any of this. Even though the property rights and issues of due process and equal protection should be of paramount importance to their viewers. They are after all, just another corporate mouthpiece for the financial elites.

      The disappointment lies in the fact that I always thought we at least stood a chance with Obama. Given his handling of this matter, that does not appear to be the case. To deny that in the face of all the easily verifiable information available, is at best naive on your part.

    3. Bullsmith

      Frankly, if you’re going to defend the President on this point, it’s important to look at the other side of the context. Along with bailing out the S&L’s they took them over and cleaned them up. Just as importantly, bankers were prosecuted and jailed in large numbers. The absence of any kind accountability AT ALL for those who created the current mess is yet another vital way that this crisis is so much worse than the S&L one was, and why it is so outrageous of the President to actively, personally, deceive the public about the gravity of the situation.

    4. Cedric Regula

      Sure. A few more financial crisis like this and the federal budget will be balanced and we will be on our way to paying off the national debt. And we owe all the credit to the banks and the masterful hands off management style of the government, Federal Reserve and regulators.

  16. TC

    “…not all of those losses would necessarily lead to a government rescue, but the odds are high a big percentage would, if not in explicit rescues, then via continued hidden subsidies which ultimately do come out of our collective hide.” If a Glass-Steagall standard were reimposed upon the banking system (as well as the Fed) and a national bank were reconstituted, uttering a couple trillion per year in credit directed toward transformative infrastructure projects, I believe your argument would prove incorrect.

    “… a slow motion train wreck in the biggest asset class in the world.” Proof positive securitization was a Ponzi Scheme dwarfing the Fed’s power to keep it going, thus begging the question, how big is Madoff’s cell?

    You fail to mention QE’s effect on energy prices and the hit consumers are taking at the pump when, in fact, there is a glut of the stuff.

    Per the President’s fading credibility — a dive begun at the G20 meeting in March ’09 — there’s his friendship with former U.K. Prime Minister Tony Blair substantiating the adage, “Birds of a feather flock together.” However, in the spirit of honesty, let’s be clear: if the U.K. is flush with truthful commentary from regulatory authorities about our growing insolvency, its purpose only is to drive the U.S.A. into the ground, as the push to overturn the Treaty of Westphalia is the very reason for such incompetent, cowardly frauds as Obama, Cameron, Bush, Blair, Brown, blah, blah, blah…

    1. DownSouth

      “You fail to mention QE’s effect on energy prices and the hit consumers are taking at the pump when, in fact, there is a glut of the stuff.”

      Nice report on CNN on this, The Fed’s ‘tax on the consumer’

      Make sure and not miss the video portion, Your grocery bill is getting fatter.

      Just like the cost of the fat yield curve the Fed engineered to bail out the banks, it looks like the cost of QE2 will also be disproportionately borne by the little people. The Fed’s decree is this: “No cost is too great for the little people to bear; the TBTF banks must be saved.”

        1. Nathanael

          Exaggeration? I’m not sure, are you judging character or results? In results, “not much better” than Hoover would be fair. In terms of what he did as President, Hoover was impressively awful. But he had such a record as a humanitarian beforehand, so there’s that….

          *Bush* was worse than Hoover (and worse than McKinley, and worse than Buchanan and Pierce and Polk, and worse than… well, he was the Worst President Ever), and to clean up after him we needed an FDR. Instead, we got a McKinley — we simply couldn’t afford that, unfortunately.

      1. tar, etc.

        Inflation in food and fuel, the housing portion of the economy put in the deepfreeze indefinitely and a fair return on savings confiscated to subsidize Wall Street. Unfortunately, this reminds me of the last time the Fed squeezed the little people to bail out finance in the 1980s. We did without so they could do with more. Back then, the bailout was still doable. We tightened our belts and competed with the Chinese. We still hoped for healthcare and pensions.

        So many of the characters then are still powers behind the throne. For instance, I came across a footnote in “Who Will Tell the People?” that Alan Greenspan, as a private consultant, wrote to federal regulators and asked them to give Lincoln Savings and Loan an exemption from the regulation limiting direct real-estate investment…”(p420)

        For normal people, screw-ups like this end your career. Not for these guys. They fail upward. After a few decades of their financial innovations, our country is toast.

  17. Independent Accountant

    Well said. I lived through the S&L crisis and estimate its cost in 1979-86 dollars at $125-$175 billion or say $250-$350 billion today. My minimum estimate of the costs of the various bailouts, bank benefits from interest rate suppression, etc., is $2 trillion, or 14% of our $14.6 trillion GDP. But what do I know? I’m neither Geithner nor Bernanke.
    The Obama administration’s credibility gap as big as LBJ’s was on the Vietnam war.


  18. Brian B

    Isn’t Paula half correct in that Obama was talking about government money lost due to the respective crises, not including private funds like bank losses?
    On the other hand she is incorrect that Barry get’s it right because Fannie and Freddie alone, inexplicably not mentioned by Yves as darkmatter points out, will probably cost 2-3% of GDP alone.
    Of course not measurable but surely much larger are the taxes never collected because of the gigantic economic damage these insane and idiotic policies have inflicted on the economy versus the quick and orderly liquidation Messrs Bill Seidman and William Isaac, two largely unsung heroes, effected in the S&L crisis.

  19. Rae Merrell

    I think everyone is a bit frustrated with this right now. The bubble was bound to burst but those responsible seem to be getting the green flag to repeat the mistakes of the past. Meanwhile it is the ordinary folks in the street who pay the penalty.

    What makes it worse I think this is just the beginning as austerity measures will be far reaching and span a number of years. Wages will be low and prices will grow high. However, the wealth of the rich minority will continue to grow. Where will it all end? Anarchy!

  20. BondsOfSteel

    OK… Obamba lost me. I was a huge supporter in ’08. I would not vote for him again :(

    He’s still better than Bush, who never pretended to be anything but a shill for the banks. The difference seems to be that Obamba can lie without a goofy grin/laugh. What’s not obivious is if it’s because Obamba believes his own lies….

    One other big disturbing point is that he’s blaming the ‘fillabuster’ as the reason for not accomplishing much of his agenda. Hmm. I don’t seem to remember any late night sessions… cots in corridors. Eisenhower was able to get the Civil Rights act of ’57 passed. Obamba can’t overturn DADT.

    1. David

      you don’t remember “cots in corridors” because the current rules of the senate make it possible for the fillibustering party to avoid that kind of commitment.

      1. BondsOfSteel

        OK. So the problem isn’t the fillibuster rule… but the rule that makes fillibusters painless to invoke. Who’s responsiable for that? Democratic leadership…

  21. craazyman

    This one inspires another “Real Men of Genius” commerical parody, this time a salute to . . . “Mr. Global Financial Crisis Cost Analyzer”.

    But sadly (or happily LOL) I have to work this morning.

    ho ho ho

    Gotta love those Bud Lite Real Men of Genius commercials. Makes it worthwhile to watch TV — as long as it’s NFL football (or some fishing show) — and not a bozo politician, of either party, being interviewed. h aha ha.

  22. Valissa

    FWIW, I never thought Obama lied credibly… and he lied repeatedly throughout his campaign on many issues large and small… the biggest ongoing lie was about not taking money from lobbyists… it was incredible how many people beleived that one even when the MSM would occasionally show the real numbers. Quite frankly I was astonished at how much he lied, even for a politician… and I was further astonished that so many believed the guy and got so caught up in the hope and change bullshit. OK, so politicians all lie and stretch the truth so you need to look past what they say to how they operate in order to see what kind of leader they will be. It was clear to me looking at how he operated in Chicago that he had little interest in policy or good governance.

    Although I did not discover this blog until after the election I can tell from the comments that many, perhaps most, of you voted for this guy. Looks like that was either because you believed his lies or you feared the Republicans, esp. the “evil” Sarah Palin who, btw, NEVER had the power to get into office because the Republican elites were never going to let her in (they were the ones who sabotaged her campaign as much as they could, in collusion with the liberal elites). Intelligent people are just as susceptible to propaganda and emotional manipulation as other folks.

    The one truly great thing about Obama being president is that liberals are finally having to face their own delusions and quasi-religious political beleifs. One of the reasons I no longer consider myself a liberal (now a post-partisan skeptic of all politics) is how liberals acted in regards to Obama. I find it hilarious and pathetic that so mnay liberals are now whining about Obama not being what they thought he was… karma is a bitch.

    1. M.InTheCity

      I didn’t vote for Obama (nor McCain), but I do have sympathy for people who thought he would be different (yes the info was there and I knew he was as bad as anyone other one from Chicago). Desperation can induce blindness. I’m just happy that the worm has turned and people see Obama as he is. I find that to be rather amazing considering.

      1. Valissa

        I would have sympathy with those who voted for him if I hadn’t been treated so horridly when I politely tried to point out some of his flaws. I got all kinds of nastiness from several people I thought were my friends just for trying to be honest and fair, and of course all the prog blogs were mercilous to any who wouldn’t “believe.” Their needing to hold on to their quasi-religious delusions was fine with me, but their determined obnoxiousness about was not. I had people accusing me of being secretly a Republican, a racist or simply an idiot. So no tea & sympathy from me. Simply “I told you so” and I’m normally a much nicer person than that.

        1. M.InTheCity

          That’s fair. I live in the UK, so I thankfully wasn’t subjected to such nonscense. Just occasionally I would watch US TV and want to throw things at the screen. I can at least turn off the TV…

    2. Doug Terpstra

      “…liberals are finally having to face their own delusions and quasi-religious political beliefs.”

      Chris Hedges shatters such delusions to smithereens in “The World Liberal Opportunists Made” — a devastating version of a video lecture “The Death of the Liberal Class” that Yves linked here the other day.

      “The lunatic fringe of the Republican Party, which looks set to make sweeping gains in the midterm elections, is the direct result of a collapse of liberalism. It is the product of bankrupt liberal institutions, including the press, the church, universities, labor unions, the arts and the Democratic Party … The virulent right-wing backlash we now experience is an expression of the liberal class’ flagrant betrayal of the citizenry.”

      And addressing your experience and this post:

      “The purging and silencing of independent and radical thinkers as well as iconoclasts have robbed the liberal class of vitality. The liberal class has cut itself off from the roots of creative and bold thought, from those forces and thinkers who could have prevented the liberal class from merging completely with the power elite. Liberals exude a tepid idealism utterly divorced from daily life. And this is why every television clip of Barack Obama is so palpably pathetic.”


  23. Bullsmith

    Johnson’s “Credibility Gap” had become a full-blown accountability gap by the Bush administration, and now as the sheer scope of financial sector fraud comes to light, there is a “legality gap” being created, more than large enough to fit all their crimes through it.

    It’s too transparent to pretend this isn’t happening, that the government is going out of it’s way to protect ongoing organized fraud. Obama and Boehner will get along just great in this one policy area at least.

  24. LeeAnne

    Apologies for putting this in the wrong place:

    Well –I read all the comments -they were so interesting that I decided, against my instincts to avoid it, to look at the videos myself.

    A few seconds in as Obama grinned and Jon motioned for him to have a seat I couldn’t take it. This lack of dignity is unacceptable and makes the US look ever more stupid and irresponsible.

    Much as I enjoy Jon Stewart and believe in his work with its ability to show truth in an entertaining way with the added punch of satire, seeing the POTUS putting himself in the position of being interviewed on a comedy show, regardless of the merits of the show, puts me in the same extremely uncomfortable position, the same feeling of nausea produced over the denigration of the office of the presidency by Republicans against Clinton porno perverts.

    NO dignity -no authority- no real power other than to mock the constitution, the country, its legacy and the American people before the whole world. REVOLTING.

  25. rossmoyer@comcast.net

    The following is not intended to be act as any sort of defense of the execrable, Obama, but it stands to reason that if the country is, de facto, if not de jure, being run by the remnants of the FIRE economy, particularly the financial (dis)services industry that they would want a stooge sitting in the Oval Office. And that is exactly what we have had for quite some time now. Debating, as some do, who is the most mendacious, Bush or Obama, is akin to clerics arguing over how many angels can dance upon the head of a pin.

    In the meantime, I’d like to second Jake Chase’s answer to the question he posed:

    “Can anything be done about this process short of physical confrontation with organized authority?” Doubtful.

    Finally, with that in mind, I’d like to offer that blogging, an activity I partake in almost certainly to excess, while certainly contributing admirably to blowing apart many of the great lies of our age is, to my mind, a very dubious instrument for anything smacking of revolution. All this by way of saying we need to step away from the screen and keyboard and take different kinds of (collective) action. Fulminating via the internet’s virtual reality, however much some of us may do it with panache, on the isn’t remotely sufficient.

    1. LeeAnne

      rossmayer, with all due respect, you are WRONG WRONG WRONG.

      Its only on the blogs that there is the possibility for truth, information, knowledge and debate for achieving a peaceful push back against the gangsters and the MSM.

      It depends on this communication remaining free, worldwide and open..

    2. Fractal

      rossmoyer, this is nicely put:

      “Fulminating via the internet’s virtual reality, however much some of us may do it with panache … isn’t remotely sufficient.”

      Did you read Malcolm Gladwell’s putdown of Facebook & Twitter as instruments of political change? Great New Yorker piece compared organizing methods used to spread civil rights lunch-counter sit-ins across the South in a few weeks to the puny or non-existent physical (real-world, non-virtual) manifestations of Facebook & Twitter communications. Point is: communicating is only part of organizing– we need to DO things, take ACTION. Posting on Facebook & Twitter (or here!) is not ACTION that will lead to results. But posting here & on other blogs does count as PLANNING. See liberal’s comment at 8:31 am.

      P.S. You should ask Yves or her moderator to delete your email address so you don’t get spammed & phished. Email address goes in the MIDDLE window, just make up some shorter version of your name for the TOP window.

      1. Nathanael

        For an important reference point, the communication about the oppression of black people in the US had to happen for *years* before actual action was organized. Before the American Revolution, *decades*. Et cetera.

        So yes, communication isn’t *enough*, but don’t be disappointed that online organizing hasn’t brought much action yet — it pretty much dates back to 2000, period, and most of it is several years younger than that.

  26. Jackrabbit

    I think OIbama was refering to TARP. His remarks are in-line with his Administration’s decision to twist TARP into a success. They do this by focusing on TARP in isolation. By this artifice, TARP is equated to a) the cost of fixing the banks, and b ) the cost of the bank’s contribution to the financial crisis.

    But TARP was necessitated by the UTTER FAILURE of government and regulators, and from that perspective, TARP can never be a success. Furthermore, TARP is a small part of government support for the banks. And the cost of support for the banks is itself much less than the damage they have done.

    I think the Administration justifies their warped point of view because the Fed and the GSEs are ostensibly independent. But minimizing the cost of bank recklessness and regulator failure is irresponsible at best. Doing so demonstrates a continuing preference for banks at the expense of responsible government.

    A half truth is a whole lie. ~Yiddish Proverb
    Those who think it is permissible to tell white lies soon grow color-blind. ~Austin O’Malley
    Honesty is never seen sitting astride the fence. ~Lemuel K. Washburn
    If you want to ruin the truth, stretch it. ~Author Unknown
    Beware of the half truth. You may have gotten hold of the wrong half. ~Author Unknown

    1. john c. halasz

      “A half-truth is like half a brick: you can throw it farther.”

      Oliver Wendell Holmes, Jr.

  27. ep3

    Yeah but Yves, he’s winning where it counts; with corporations and rich people. Being a product of this empire mentality, all he cares about is making corporations more powerful and glowing in the fact that he’s the first black president. Conveniently, he didn’t come from a black family that has that, what does he call it, “the chip on their shoulder”, from having people like his father sell people like the blacks here in America to white Americans and then enduring 400 years of oppression.
    Notice how throughout the interview he reinforced that change, regardless that it’s this potemkin form that he promotes, should be enough to make us happy and shut up so that he can get down to business of managing the empire. He even said that, when Stewart kept asking about fixing the broken systems, he said that he never was promoting changing the systems themselves, just reforming them so they looked less broken. So when people were saying “this doesn’t work”, he says ‘no we aren’t gonna change the system, we are just gonna reform how people access that structure’. That’s like saying what jesus said “u build the church on a solid foundation then it will be a good church. but build it on sand and it will crumble away.” The American people were saying the foundation was made of sand and needs fixing. Obama is saying the foundation (corporatism, broken thieving banks, police state) is solid, we just need to put up a new coat of paint.

    I am glad you have truly caught on to his rhetoric Yves. You are taken seriously and you reject his fake change.

    1. ep3

      I want to say also that the “heckuva job” line should tell a very large story.
      He is nothing but a mouthpiece for the elites. By him using the same language as Bush shows that the same people are in power and that even tho he wasn’t around them 5 years ago, being around them now has influenced Obama to say/use the same language that those elites use.

    2. Nathanael

      No, he’s *not* winning with corporations and rich people, and that’s why it’s so aggravating.

      We expect a member of the looting class like Bush or Cheney to loot. And when they break the goverment and use it for evil and to help their looter friends, they do “win” with them.

      But when someone like Obama helps out the banksters, he will never get any credit for it. The good rich people obviously are upset that he’s helping out crooks, just as they were with Bush. The banksters and other crooks and looters — well, they’re happy to take whatever he gives them, but they’re *ungrateful* for it, because he’s not One of Them, and he’s only giving them 90% of what they want, not 200%. So he *doesn’t* win with them, even when he helps them.

      Our kleptocrats are *ungrateful jerks*.

  28. steelhead23

    Thank you Yves, for not pulling your punches. For those who believe that declaring Obama to be a liar indicates support for other mendacious politicians, your loyalty exceeds your devotion to logic. Virtually all politicians lie. However, lying about the greatest financial crisis of the past 60 years is more than a tad different from lying about taxes. Further, these lies undermine the credibility of the government to manage crises. To be clear, the U.S. Government should be planning on major bank failures, developing contingency plans, indeed, building a response that can not only maintain economic function, but reassure the American people and the globe. Lies about the severity of the crisis undermine the confidence among the literati that the government is competent.

  29. Dzoner

    “But Team Obama is no doubt rationalizing this chicanery: if they can keep from recognizing losses until the recovery takes place, then the ultimate damage will be lower.”

    Bit of a problem there what with Peak Oil about to rollover into Declining Oil = there is no ‘recovery’ about to take place in our lifetime.

    The 2012 election = wtf?

  30. Blurtman

    So if a government were taken over by an industry group, what would it look like exactly? Self enriching activities with government backstopping, breaching of the law without consequence, industry chosen cabinet officials, unearned wealth transfers.

    1. Fractal

      Italy. That’s what you just described. We are turning into Italy.

      I just got back from Venice. Most beautiful city I have ever seen, even though I had only two days to see it, and even though it was run down and degraded and miserable in winter weather and high water (aqua alta) flooded the calli & campi (streets & squares).

      1. Nathanael

        Isn’t some even-more-decrepit country a better comparison? I keep thinking South and Central America, maybe Honduras or Guatamala. In Italy the elites at least build useful infrastructure (high speed trains for instance). Here they don’t.

  31. Hubert

    Observation from the clips: Normally people in Jon Stewart´s show wait for a joke to start cheering. And they appreciate intelligent jokes.
    This time they seemed to wait for catch phrases from Obama. It is hard to attack a sitting president who comes to your show. And the people in the studio did not make it easier for him in any way. There was not one Buh or discord even when Obamas bullshit went into overdrive, only with the “heck-of-a-Summer-job” as a small exception.
    So is the Democrat base still this stupid or did the White House somehow take part in chosing who went into the studio on this day?
    What is your guess ?

  32. EmilianoZ

    I note that Obama received tremendous applause when he entered the Daily Show set and again when he defended Congress, the HCR bill and financial bailout. Still a lot of true believers out there.

    When they compute the total GDP, maybe they also add all the bailout monies. After all it is creation of wealth. Well, at least for the banksters.

    1. Valissa

      Who do you think was in that audience… random people off the street? I’m pretty sure I remember reading somewhere that much of the audience would be White House or congressional staff and related friendly faces.

      Here is Dana Milbank’s take on it, and given that he’s an establishment critter himself, I find it pretty interesting.

      On the Daily Show, Obama is the last laugh http://www.washingtonpost.com/wp-dyn/content/article/2010/10/27/AR2010102709035.html?hpid=opinionsbox1

      I did watch the show last night, fortified with some excellent 18 yo single barrel bourbon (Elijah Craig). Of course Stewart couldn’t go too far, but was pleasnatly surprised he dared as much as he did. Enjoyed watching Obama squirm and get defensive… heheheheh.

  33. Not a chance

    Billions? No, trillions.

    You can’t have the discussions of “costs” unless you’re willing to entertain the FED’s balance sheet, QE1, QE2, FASB rule changes (put off the costs) and all the guarantees. We’re well over 2 trillion today and could easily cross 10 trillion in direct costs over the next five years.

    Obama lied. Worse, he knows it. Bush may not have known he was lying half the time. That’s the downside of promoting yourself as “intelligent president” and then acting like the last one. You can’t get away with it.

    Obama’s governance has been a mistake since day one. He’s a rich man, creditor, stockholder and bondholder’s dream, yet he can’t even play inside baseball to get the tax increase on his prime beneficiaries. He’s a poor man’s nightmare.

    Who’d have thunk it, huh?

  34. Moreover

    Moreover, the optics are obvious. Republicans hate him even though their benefactors are benefiting massively from Obama’s policies. Obama is funding the GOP benefactors like no other time in history.

    Then, Obama comes around progressives and he looks ashamed and unhappy to be there…. uncomfortable. He didn’t even handle the optics well on the Daily Show. Forces smiles and feigned offense. Quite a difference from the campaign.

    My question: Who is this guy I voted for? I have no clue.

  35. kezza

    The only way I can get the figure Obama puts out is the loss on the books according to the phoney accounting rules the banks have managed to blackmail the Congress and FASB. The financial reality these days are what you make believe, not the actual accurate reflection of reality.

  36. Tom Hickey

    I really doubt that the president understands the numbers he is given He is just the mouthpiece. He just listens to Summers, Geithner, and Bernanke and repeats the message. He picked the wrong economic team, and it seems that he has not yet realized it. I doubt he ever will.

  37. Hugh

    Of course, Obama lied. He is the kleptocrat-in-chief. Kleptocracy is based on theft and deception. Lying is part of the job description.

    Along with the Daily Show appearance, Obama also met with “liberal” bloggers. I wrote on this elsewhere. They softballed him and he totally flimflammed them. Basically, he told them that while he sympathized with them, for reasons outside of his control: Republicans, the filibuster, his cat food commission, he could do nothing for them. And when he was done lying to them, like any good courtier journalist, they asked about the baseball game, and went quietly away.

    1. Cynthia

      The S&L crisis of the late 80s to the early 90s didn’t cause systemic damage, nor did it go viral. The same thing can’t be said about the the global financial crisis of 2007-2008. And I must say that it’s not called a “global” crisis for nothing!

      I suppose that Obama knows he got away with lying about how most of the oil from BP’s spill in the Gulf vanished into thin air, so he must feel pretty confident that he can also get away with lying about how we suffered very few losses after the TBTF banks dropped the financial equivalent of a nuclear bomb on our economy! But it does make me wonder why Obama would want to lie to the American people when the only Americans who are dumb enough to believe his lies are the 3-G (God, Guns, and Gays) teabaggers — the very people who despise him so much that they’d rather sell their Medicare scooters, move to Sudan and join Al-Qaeda than live in America with Obama as their president for a second term!

      1. EmilianoZ

        The oils pill! I wish Stewart had brought that up. And also the 2 wars. He had Obama for 25 mn. In the end they didn’t cover much ground.

        Stewart was very soft on him, maybe they had an agreement before the show. The audience seems to have been carefully selected too. Who on earth would applaud and cheer when Obama defends an universally loathed bailout?

  38. Psychoanalystus

    In the UK you don’t have nearly the levels of sheer brain deadness you have here, so the lies and scams the vast majority of Americans are willing to take as truth would never fly in the UK or anywhere in Europe. Sorry, but I lost all respect for this stupid nation.

    Looking forward to reader comments…lol


    1. tar, etc.

      Aye, we do. Jon Stewart helped elect Obama, and now intermediates with those he helped con into electing the investment banker-war profiteer’s best friend. I’m not saying we had any good options last election – although we must wonder why Clinton and McCain weren’t enough for them – but the point is that there were no options. There aren’t in the next election either, and Stewart can’t make that funny.

  39. Roger Bigod

    My psychological situation is the Ultimatum Game, an experiment in which the investigator gives, say $100, to the first player on the condition that he split it with the second player. If the second player agrees to the split, the money changes hands. Else, no payment. Most people in the first player’s position offer $50 or somewhat less and get agreement. But as the offers get smaller, the second players start to refuse the offer, whether from a sense of fairness, self-esteem, whatever. The effect is seen across several cultures. It’s profoundly irrational, because any payment is better than nothing and the second player knows this.

    Obama is telling us to get enthusiastic for Democratic candidates because the alternative is worse. But I keep coming back to his sell-out on public option, after which he pretended for weeks to support it. It’s the equivalent of an athlete taking money to throw a game, then appearing at a pep rally to accept the applause of the fans. To be fair, the athlete’s behavior is illegal. OTOH, he didn’t take an oath of office.

    I can’t see how anyone believes him on DATD. He claims to have no opinion on its constitutionality because he’s not a sitting SC Justice. But he’s enforcing it and he did take an oath to uphold the constitution. Huh? It looks like he sold it out to the Pentagon long ago and is just going through the motions. With fierce urgency, of course.

    1. Nathanael

      You’re a little behind on your economic game theory. It’s irrational to refuse if you’re only playing *one* game.

      If you intend to play multiple rounds of the game, it’s rational to refuse — it’s the “mutually assured destruction” principle. Knowing that if he offers you too small a deal he will get nothing, the first player has an incentive to actually offer you more.

      A lot of Democrats are getting to that point. “Better than nothing” is not good enough any more and they’re demanding a real party fighting for real good, or bust. Once you’re bad enough off, I guess bust just doesn’t seem so bad.

  40. emca

    To Barack H. Obama:

    When you make a deal with the devil, you lose. Your Faustian connivance won’t mask the bargain and words won’t obscure the naked reality of your obsequiousness.

  41. FS

    Get serious. Do you actually think company quarterly financial reports tell the truth? Why aren’t you outraged about that? I can turn on the TV any night of the week and hear far more outrageous lies than this.

    1. Nathanael

      Quarterly reports from companies incorporated in Western Europe tend to be fairly honest, because the rules they have there are pretty strict and they are actually enforced.

      In the US? Well, that USED to be the case, but not any more.

  42. Fractal

    I regret the need to correct you, Yves, and your commenters Independent Accountant, Bullsmith & maybe others. Although LBJ did turn out to be a lying war-monger, this sentence is wrong:

    “In the 1960s, when the media realized that president Johnson was regularly telling whoppers, the expression “credibility gap” was born.”

    The “credibility gap” was the buzz-word used by HAWKS to justify bombing North Vietnam, Laos & Cambodia into the stone age. (See Andrew Bacevich, “Washington Rules,” for similar angle.) The “credibility gap” was NOT a description of LBJ’s PR problem. The mainstream media was truly clueless that LBJ was a lying shithead until he actually withdrew from his re-election campaign in March 1968 after Eugene McCarthy kicked his ass in the NH primary.

    The need to bolster & preserve American “credibility” was the pretext for continuing a cruel destruction of the civilian population in tiny South Vietnam because without that “credibility” the Communists would stop believing in America’s power and “dominos” would fall in sequence all over Asia. The “credibility gap” went hand-in-glove with the “domino theory.” I knew it was bullshit in 1966 when I realized I would be drafted as soon as I graduated HS. (Lottery replaced the draft on my birthday, Jan. 1, 1970, and I got a high number. Otherwise there would be no Fractal here to make annoying corrections.)

    Eventually the country realized it was all bullshit, but not before they killed 50,000 guys. Topic for a separate blog, possibly for IAVA or Voters for Peace or Win Without War.

    Meanwhile, I love your take-down of Obama’s current confabulations– but you didn’t mention Geithner or Summers once! A few of the commenters drag them in for appropriate abuse. Except for Christine Rohmer, Austen Goolsby, Lisa Jackson, Mary Schapiro and Elizabeth Warren, the first-term appointments have been a frickin’ disaster: Rahm, Timmeh, Larry, Peter, Axe, Valerie, Thad, etc. (Sen. Salazar at Interior?).

    1. Kevin de Bruxelles

      I cannot think of a nice way to put it so let’s just say — dude you are soooo wrong.

      Yves is using the term credibility gap quite correctly.

      During the 1968 Presidential campaign American GI’s in South Vietnam used to wear buttons that said, “Ambushed at credibility gap” It totally refers to LBJ’s bullshit and it is a very good comparison to Obama’s lies about the bank bailouts.

      And in your phrase, “civilian population in tiny South Vietnam” surely you mean NORTH Vietnam.

      1. DownSouth


        One of the ailments eating away at the heart and soul of the United States is that it never recovered from the credibility gap of the 1960s, as the first graph here illustrates.

        Since 1997 (when that first graph ends) trust has rocked along the bottom within the range of the new lower norm, never to recover to the pre-Kent-State-massacre levels. However, it recently matched all-time lows:

        Just 22 percent of Americans say that they can trust the federal government almost always or most of the time, among the lowest measures in half a century.

        Perhaps this from Ernest Hemingway says it all:

        It is very easy to fool the people at the start of a war and run it on a confidential basis. But later the wounded start coming back and the actual news spreads. Then, finally, when we have won, the men who fought the war come home. There will be millions of them who will come home knowing how things were. A government which wants to keep the confidence of its people after the war, or during the last stages of it, should take the people into its confidence and tell them everything that they can know, bad as well as good, so long as their knowing of it does not help the enemy. Covering up the errors to save the men who make them can only lead to a lack of confidence which can be one of the greatest dangers a nation can face.

        1. DownSouth

          A notable exception to this trend is the black population, where trust in government has recently soared.

          This is testament to the great racial divide that still splits America, and the fact that human beings aren’t really rational, their mental processes being captive to all sorts of group loyalties and prejudices.

      2. Fractal

        NYT search engine yields many references to “credibility gap” describing it as the gap between LBJ’s claims about the war in Vietnam and the truth. None of them are contemporaneous (i.e., none are from 1963-68). I was wrong to say Yves was wrong in wrapping the “credibility gap” around LBJ’s neck, at least according to NYT articles since 1981.

        I was framing the use of “credibility gap” in the way that LBJ himself invoked U.S. credibility as his justification for continuing the war. Take this, f’rinstance:

        “Obsession with seeming unequivocal and immovable has been frequent in the Oval Office. During the Vietnam War, such fixations were indifferent to the fact that the war was losing the U.S. government moral credibility around the world. But from the outset, Lyndon Johnson invoked credibility as an argument for staying the course. “If we are driven from the field in Vietnam, then no nation can ever again have the same confidence in American promises, or in American protection,” President Johnson said on July 28, 1965.”

        See Link: http://www.commondreams.org/views05/0705-22.htm

        I also recalled Neil Sheehan’s book “Bright Shining Lie” explaining the credibility gap in the manner I did. Unfortunately, I loaned out my copy and Google Books seems to serve up only a tiny sample of excerpts including the word “credibility,” as the linked Google Books search result should demonstrate.**

        As for whether civilians were brutalized and villages destroyed in South Vietnam or in North Vietnam, Sheehan’s book definitively answers, BOTH. All of the ground combat was in SOUTH Vietnam; attacks on the north were primarily by B-52 bombing sorties.

        ** link: http://books.google.com/books?id=I_ECCk6SQQIC&printsec=frontcover&dq=Neil+Sheehan+Bright+Shining+Lie&hl=en&ei=ykPKTPqKNoO8lQem5v2CAg&sa=X&oi=book_result&ct=result&resnum=1&sqi=2&ved=0CCUQ6AEwAA#v=onepage&q=credibility&f=false

        1. Kevin de Bruxelles


          I cruised the indexes of both “A Bright Shining Lie” and “The Best and the Brightest” but could not find anything about the credibility gap. In Stanley Karnow’s Vietnam a History there is a quote from a Pentagon spokesman that was very close to the concept of credibility gap where he mentions a “credibility disaster” Here are also several references to credibility gap in the sense Yves used it. (I actually just discovered that you can search terms on Google Books thanks to you!)


          What is certain also is that Walter Lippman, who was a very influential columnists (who oddly enough also tended to tell the truth) wrote two columns at the end of March, 1967 entitled, “The Credibility Gap-I” and two days later, “The Credibility Gap-II. So I think there can be no doubt that this phrase used the way Yves did, existed at the time.

          On the other hand, the credibility that you are discussing is also a very important concept but I think it was much later that it was combined with “gap”. Just as you say, the hawks indeed did eventually appropriate this term but this was well after the LBJ period.

          The theory of “credibility” in the sense you are using it was developed (or at least popularized) by Thomas Schelling in “Arms and Influence” and ties in with general deterrence and coercion theory that he developed in “The Strategy of Conflict”. Interestingly enough, just to demonstrate how today’s events do move along similar tracks to the Vietnam era, it was in Schelling’s descriptions of credibility that Nixon probably got his “Madman Theory” which I would say the Fed just tried to use recently with all their talk of flooding the world with massive liquidity in QE2 if the rest of the world didn’t blink. Schelling tries to explain that being seen as rational is not at all necessary to build credibility, and actually being seen as irrational could be an advantage. He uses an example from Joseph Conrad’s “The Secret Agent” where a small stunted Chemist was supplying anarchists with nitroglycerin to make their bombs. A friend of the Chemist asked how he got away with it when everyone knew it ws he who was supplying the explosives. The Chemist explained that the police could not stop him from afar because shooting him from a distance would have only proven the anarchist’s point about the hypocrisy of bourgeois morality. And they dared not try to arrest him up close because he was known to always carry enough explosives on him that would be triggered by a small rubber ball he always kept clinched in his pocket. Of course he probably never would have blown himself up but it was his ability to convince his adversaries of his iron will that deterred the police from ever arresting him.

          Of course bluffs like this were never going to work on Ho Chi Minh because he had already shat away one military victory on the battlefield by turning it into a defeat at the peace table when after achieving a decisive defeat of French forces in Indochine he foolishly agreed at the settlement talks to divide Vietnam into two and await elections in the South before reuniting the country. Those elections of course never took place. His generals would have never allowed him to throw another military victory (or more correctly a military stalemate and political victory) away so all of Johnson’s and Nixon’s bluffs were useless.

          My comment on the NORTH was based on the idea of continuing US involvement in the war meant carpet bombing North Vietnam. A US pull-out would not, and did not stop the war. The North were always going to continue until they had conquered the South. So if anything continued US involvement pushed more pain on the North and kept the South from having to deal with their ultimate fate for a few more years.

    2. Bullsmith

      Thanks for the history lesson although even if the term wasn’t applied to LBJ at the time, it is certainly apt in hindsight. Sadly it applies to the entire political class these days. It’s not just honesty that’s disappeared, it’s shame.

  43. Sharkie

    We’re creating … an ownership society in this country, where more Americans than ever will be able to open up their door where they live and say, welcome to my house, welcome to my piece of property. – President George W. Bush, October 2004

  44. SteveL

    Oh come on – This post is unfair to Obama.

    Clearly he was talking about direct federal expenditures in propping up the system.

    1% of annual GDP is about right.

    Yes, the overall cost of the meltdown is bigger – In no way is he suggesting otherwise. Yes, additional direct federal funding may become necessary, but who knows what that might be.

    His statement is quite defensible

    1. Jackrabbit

      Defensible, yet reprehensible nonetheless.

      The Obama Administration’s focus on the cost of saving the banks is a calculated misrepresentation. The SNL crisis is not comparable to our current situation. What we have now is far worse.

      See more at my comment above.

    2. Yves Smith Post author

      The Fed has been acting as an off balance sheet funding vehicle of the Treasury. Looking at budgetary commitments in light of Fed actions, and certain Fed losses (buying assets to prop up prices which they will unwind at losses when they finally generate inflation, plus probably credit losses) is incomplete and misleading.

      And as I indicated long form in the post, the magnitude of unrealized losses on bank assets, second mortgages alone, is so high that reputable experts expect a second round of bailouts. So the tally is premature.

    3. Progressive Ed

      Of course. But isn’t Obama a Marxist? If not, why has he sprinkled Marxists and Socialists throughout the government via his appointments. He hasn’t failed at all;, he’s moving the country slowly, painfully toward the Hugo Chavez model in Venezuela. But it’s going to take time and over the long run he will succeed if those Right Wing/Conservative nuts don’t prevent it. Isn’t there a saying by one of Obama’s favorite philosophers: something about eggs and an omelet?

      1. Yves Smith Post author

        What are you smoking? Whatever it is, I have friends who want some, it’s clearly more potent than what they can procure.

        Obama a Marxist? You can say that with a straight face? He’s a classic corporate elitist. Chicago Law School, which is where he taught for a while, has a strong “law and economics” bent, which means neoclassical economics, the antithesis of Marxism.

        And Marxists in his Administration? Marxists have been run out of pretty much every academic institution in the US (there are a few lonely bastions where they are tolerated, as quint amusements). They are most certainly not welcome in positions of power in the US.

  45. Paul

    The 1.5% number isn’t even correct! To mention only the current level of writedowns is flawed. The real “cost” is about $2 trillion, considering the $800 billion spent on stimulus and the 1.25T spent on MBS purchases that are NEVER going back to the banks. Calculate that number and your looking at more like 15% of GDP, not to mention all the POMO and other actions taken on by the Fed (audit?), that is trickling out wasted billions on a weekly basis. If we have another round of multi-trillion printing (QE2), the number goes to +30% of GDP.

    This does nothing to address the very real chance of hyperinflation, in which case the cost as a percent of GDP becomes infinite.

    1. craazyman

      Yes, and the other set of numbers that NOBODY has even mentioned is the cost of personal distraction for the American people.

      consider that the average educated adult is forced to spend 10 hours per week reading up on the financial crisis, just to keep up with the news.

      Now consider that’s ongoing for a year.

      So we have 10 hours per week X 52 weeks/year = 520 hours per year.

      Now let’s put a $40/hour price on that, because you could be reading up on the NFL or the NBA or watching a Bass Fishing show or watching a Nature show or watching Project Runway or even Seinfeld reruns.

      So that’s 520 X $40 = $21,000/year of wasted time.

      Now multiply that by, say, 40 million people and that’s a total of $832 Billion per year, as long as this lasts.

      I dont’ know about other people, but I’d just as soon all this didn’t happen and I could go about my normal shallow trivial vaccuous business, instead of sitting around trying to figure out why the whole economy blew up and Wall Street is still getting $144 billion in bonuses.

  46. demented chimp

    Daily Show Credits
    President Obama as the Wizard of Oz
    Jon Stewart as Dorothy
    Tim Geithner as the Scarecrow
    Rahm Emmanuel as the Cowardly Lion
    Larry Summers as the Tin Man

      1. demented chimp

        Wicked Witch of the West – Lloyd Blankfein
        Munckins – Us
        Good Witch of the North – Yves Smith

      2. demented chimp

        Winkie guards (for the wicked witch) – Tea party members
        Emerald City – Washington
        Witches Castle – New York

        Movie needs a remake for 2010… someone please do it…. calling hollywood here

  47. PJM

    Thats why Im loving more and more USA. The only cowntry where any actor could be President. And mr. Obama is the best actor in the White since mr. Reagan. And is more professional too. :))

    Long Live the President of USA and his followers. ahhahhahahhahhahahhah

    Long Live Whithe House Bellywood.

    Long Live Penns. Av. Schools of great actors.

  48. noash

    A good discussion on this topic. I for one am deeply disappointed in Obama. I thought he was a truth-teller. The “vacant look” someone mentioned above is accurate. I feel like he lost his backbone somewhere along the way. Or maybe I was just a fool all along. The coming crisis will not be pretty.

  49. Celi Vulo

    Ah…. excuse me but the 2007 – 2008 bailout? Wasn’t that Bush’s watch. Today, GM paid down 11b in debt. AIG is selling Asian assets for about 35b. Total ROC for Tarp is coming in at about 8%. You day traders wish you could get 8%. The level of illiteracy in this nation is the problem! Especially white male bloggers who for some reason have enough time to write a blog. I am in the top 2% of income earners in this great land and my tax rate this year was 17%. Yeah bud, that’s about $300K in a recession. Oh by the way, I am a small business owner as well. I am not bitching about Obamacare, estate taxes, ss taxes, or anything. What I want is demand. I want the government to borrow 3trillion from the Chinese and put idiots like you guys to work sweeping streets. Then you will take your well deserved $9 bucks an hour and spend it with my business. Inflation is criminally low in this country benefitting no one but wealthy heiresses. If you vote in the Tea Party, you deserve what you get. I will make even more money while you starve in the streets. I will step over your emaciated children’s bodies to get to my BMW. I DO NOT PAY ENOUGH TAXES IN THIS F’d UP NATION!! Get that. Warren Buffett and I are the only sane people in this country.

  50. Artos Abartos

    OMG!!! What a shame. I am going to use your own sources here and give the people a full quotation speech from your source, which you so conveniently removed:

    “It is clear that banks would not have deep enough pockets to foot this bill. Assuming that a crisis occurs every 20 years, the systemic levy needed to recoup these crisis costs would be in excess of $1.5 trillion per year. The total market capitalisation of the largest global banks is currently only around $1.2 trillion. Fully internalising the output costs of financial crises would risk putting banks on the same trajectory as the dinosaurs, with the levy playing the role of the meteorite. IT COULD PLAUSIBLY BE ARGUED that these output costs are a significant over-statement of the
    damage inflicted on the wider economy by the banks.”
    You see it sound different now does it. But wait there is more…right there in the same paper…

    “The narrowest fiscal interpretation of the cost of crisis would be given by the wealth transfer
    from the government to the banks as a result of the bailout. Plainly, there is a large degree of
    1 For example, Reinhart and Rogoff (2009).
    2 BIS Review 40/2010
    uncertainty about the eventual loss governments may face. But in the US, this is currently
    estimated to be around $100 billion, or less than 1% of US GDP. For US taxpayers, these
    losses are (almost exactly) a $100 billion question. In the UK, the direct cost may be less
    than £20 billion, or LITTLE MORE THAN 1% of GDP.” Pg1-Pg2


    You see what I did there?! OMG, OMG, could it just be, maybe, just maybe that OBAMA is not lying?! I know it sounds strange, but I am just saying, perhaps Obama is referring to numbers and you on the other hand, just pure speculations, which by the way are called as such by the author of the paper that you so dearly quoted?

    1. Yves Smith Post author

      I suggest you read the whole paper. Haldane is a member of the Bank of England, and has to acknowledge that the official estimates by the US differ from the picture he presents. The section you extracted is a necessary caveat in his overall argument.

      And I indicated, long form in the post, why the current less than 1% estimate is rubbish. Several experts expect more bailout based on second mortgage losses alone. And many of the losses are currently being finessed at the Fed, via QE purchases which are certain to be unwound as losses. So the official fiscal reports are both premature and incomplete, since the Fed is effectively acting as an off balance sheet funding vehicle of the Treasury.

      This is like calling a baseball game based on second inning results.

  51. billw


    Glad to see you are finally acknowledging what a far left socialist (Obama) has done to our country. None of this was by accident because he is doing exactly what he intended to do. Socialists do not solve problems, they just kick the can farther down the road antil the working man’s pain is so bad that he wakes up and puts in some conservatives ( like Reagan) to clean up the mess. Once everything is cleaned up we start the same process all over again. It is the old story of humans believing that they can get something for free.

    1. Chris

      Total garbage. If you think Obama is a socialist, then you don’t know what a socialist is. You also haven’t been reading this blog.

    2. Yves Smith Post author

      Obama is most decidedly not a far left socialist, or a socialist of any type. No socialist would be in favor of the continued looting of the public by the banking sector. And look at his phony health care reform. It enriches Big Pharma and the insurers. Since when does a socialist stand for programs that enrich large private companies?

      Obama is much more in the tradition of fascists, specifically Mussolini style corporatists. He tries to hang some progressive bells and whistles on his actions to appeal to the Democratic base, but for the most part, it isn’t working.

      1. Paul Tioxon

        You know we love you, but seriously, your political pronouncements, that fascists are in charge of the White House is a little too 1930s. Almost all economies have merged the government functions with industrial corporate production functions on a policy level, to produce the modern mixed economy nation state. The New Industrial State as Galbraith put it, but yes, what Mussolini did, as well as Hitler, and FDR they all were grasping for a life preserver in a social system melt down. The state intervened with industrial and financial corporations and came up with practical working policies that put people back to work, roofs over their heads and food on the table. The basic animal problems that economics must address successfully or we are all headed to hell in a hand basket.

        No Democrat thinks of Obama as a socialist or hoped for socialism from Obama. The mixed economy that we have is under attack by various right wing republicans who still, after 75 years, think there is a problem with Social Security. The problem, in their mind, is that it will lead to government totalitarian oppression. As opposed to corporate oppression of Pinkerton agents and cops beating anybody to death that wants more money, for more food and less misery.

        Your problem is pretty clear to me. Your position in the economy is the epicenter of a crisis of complete failure. You are one of the fortunate at the apex of the economic strata. You and your financial readers are the specialists of Wall ST and of banking and of economics as it pertains to a decidedly commercial practice. And that’s okay. There nothing wrong with that. We are now all in it together. I really like being here. I like yr book and its analysis. I am glad you could make a presentation about just what the hell happened and why it happened.

        I also like yr daily updates. I like yr crusading focus on the foreclosure crisis. What I do not like and really do not understand is your total disgust of Obama. Really, what are the alternatives? McCain or Palin ’12 or Mitt Romney or just who do you think will go in there and do something substantive with the fractured Congress and Senate, much less the militias marching around like Obama really is Il Duce. I would have expected you understood with a mixed economy, a good euphemism for fascism, that interlocking directorate like personnel roles happen between the government and the corporate sector. From McNamara, The Wise Men that interceded with LBJ to Ron Rubin and Larry Summers, this is not news that a Military Industrial complex or Financial Federal REserve/ Banking complex or has been institutionalized in our political economy here and around the world for quite some time.

        Now, I say this by way of description and not apology. But Obama as compared to what alternative. No, he is not even close to ideal. But he has some utility. He is worth his weight in insider trading intel as far as our image goes with the rest of the rapidly developing non Western European world. And as far as his accomplishments, as compared with FDR or even the S&L Resolution Trust Corp., well, that can’t be entirely defended and I am pissed. Let’s look at the fact that FDR had over 4 elected terms and Truman to follow through with the implementation and defense of the New Deal. We can’t get simple unemployment benefits that we pay into for tens of millions of people who beginning to lose their homes. Obama is not blocking that. The big disappointment with Health care is the lack of a public option, but Medicare can be expanded in the next few years down to the age of 50. With CHIP programs, most everyone will be covered. We will see that happen in the next few Congressional Sessions if not the very next one, controlled by the republicans. We will have to wait til they are gone to get it, but it will happen. I just don’t see all of the need for the vitriol against him.

        1. Nathanael

          The problem with Obama is very simple: we needed better, after the wreckage wrought by Bush & co. We needed an FDR.

          We got a McKinley (look up his position on free silver before and after the election if you don’t get my reference… his policies on foreign invasions also bear some study). It’s really disastrous.

        2. DownSouth


          The fact that you don’t know the difference between fascism and progressivism doesn’t demonstrate much of a command of either history or political philosophy. Nowhere is your amazing ham handedness more evident than when you lump FDR together with Hitler and Mussolini.

          What Yves said to Progressive Ed would be an appropriate response to you as well: “What are you smoking? Whatever it is, I have friends who want some, it’s clearly more potent than what they can procure.”

    3. Nathanael

      Absolute, ignorant rubbish. A *real* socialist would have liquidated the banks, put the people running them in prison, and operated them as a government service.

      A half-hearted socialist would have liquidated the banks, put the people running them out on the street bankrupt, and reorganized them to benefit homeowners and depositors — as they did in the Nordic countries.

      Obama’s a corporatist.

  52. abelenkpe

    Yawn. Let’s see: Vote for republicans and their bigoted hate filled tea party pals and make corporations and the wealthy elite ecstatic or vote for democrats and hope they remember they’re supposed to defend the common man.

    Hope only exists on one side as slim as that hope may be.

    1. DownSouth

      You engage the same sort of half-truths that Paul Tioxon does when he defends Obama in his comment above with his “But Obama as compared to what alternative” remark.

      You and Paul paint this highly distorted picture where there are only two options, either to vote for Obama or vote for the Tea Party/Republicans.

      Of course this isn’t how the real world works at all. When confronted with a choice between voting for Obama or voting for the Tea Party/Republicans, many will decide not to vote at all. That’s what makes Obama so dangerous. He facilitates the rise to power of what Jonathan Schell called a “mass minority.” That’s how the Nazis and the Bolsheviks came to power, and that’s how the Tea Party/Republicans can come to power.

  53. Paul Jurczak

    According to GAO/AIMD-96-123 RTC’s Financial Statements, estimated cost of S&L crisis was $87.9 billion (at the end of 1995 small part of it, $6.6 billion, was still unresolved). Mean GDP between 1987 and 1995 was $6.069 trillion per year, therefore official direct cost of S&L bailout was 1.4% of GDP.

    We are not even half way through current crisis resolution, so putting a definite number on loses is pure folly. Having said that, I think we are way past 1% of GDP point.

  54. papicek

    His appearance on Stewart’s show was electioneering. He was trying to put himself infront of the younger voters he managed to mobilize in 2008.

    You expect truth from a politician under these circumstances? This political season?

    You’re brighter than that.

  55. John A

    The wheels come off the Obmamawagon when Progressives like Stewart don’t toss him softballs anymore or idiotically hand him Nobel Prizes or Grammys. Famously thin skinned, he’s now revealing that a) he’s either a hollow egomaniac or b) a Luddite true believer that literally cannot process the law of unintended consequences. As I watched Obama tell Stewart about how 30 million Americans will now have Healthcare, I’m thinking does The Messiah not get it that it will be at the cost of 30 million Americans out of work? Does he really think that anyone really opposes having a healthcare system that works? But that’s still the narrative that he’s selling, only the folks that bought the social justice agenda that Obama and the left sold them is now having to think about that as they are worrying about having a job or watching the economy implode.

  56. Sean W

    It’s funny how you claim Obama doesn’t even bother to lie credibly and then engage in some highly speculative analysis that calls into question Obama’s claims but doesn’t come close to disproving them. Maybe you should change your headline to “Obama makes annoyingly credible claims about the cost of the financial crisis that I don’t believe will be borne out in the final analysis when all of the dust settles.” If your interested in correctly stating the state of affairs rather than hurling angry loogies in the direction of the president.

    1. Yves Smith Post author

      Bogus argument. This analysis isn’t “highly speculative”; my calculus is in line with what other central bankers and independent economists cite as the cost of the rescues. I could just as easily have cited SIGTARP, which comes up with a cost of $23 trillion, or 2x GDP, but everyone rejects that figure as way too high. My analysis is mainstream, it’s the Obama and Treasury one, contrary to your assertion, that is the outlier, and by a large margin.

      Basing the costs of the rescue on TARP alone (and the Freddie/Fannie rescue) without adding in the extra-budgetary sleight of hand via the Fed, which former central bankers have objected to, and other analysts INCLUDE in the cost of the rescue, shows that his less than 1% claim is based on phony accounting.

      So my argument isn’t based on any “final analysis”, it’s based on the fact that his claim is based on cooking the books NOW.

      In addition, I clearly point out that second mortgages, which are clearly carried at unrealistic values, alone are enough to blow a back-to-the-TARP hole in the balance sheet of major banks. Those should also be written down now before any claims of “Mission Accomplished” are made.

  57. Arielle

    So you’re complaining because you don’t like what President Obama has to say about the “the financial crisis of 2007-2008″…you ARE aware, are you not, that Obama was not in office either of those years and has NOTHING to answer for in relation to them? He took office in January of ’09 and as much as the right would LOVE to blame him for the failures of the Bush administration…it’s simply not so. President Obama has nothing to answer for at any time prior to 2009.

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