"And maybe they’re hoping we’ll buy their bezzle."
February 5, 2009 11:25 AM Subscribe
The savings and loan’s decision not to settle the lawsuit made no economic sense for a solvent institution, but it made perfect sense if their principle objective was to maintain the false appearance of solvency for as long as possible. The savings and loan was undoubtedly inflating all of their assets, including my homely little lawsuit, to postpone the inevitable.Brad Miller, US Congressman for the Thirteenth District of North Carolina advances a possible motivation for the apparently illogical behavior of US banks.
What reminded me of that incident from my late, unlamented law practice was the persistent failure of financial institutions to modify mortgages voluntarily. It makes perfect economic sense for a safe and sound institution to avoid the ruinous costs of foreclosure by agreeing to reduce the principal and monthly payment for homeowners who can pay a mortgage, but not the one they’ve got. But according to the National Association of Consumer Bankruptcy Attorneys, fewer than ten percent of mortgage modifications in November reduced the principal. About half added late payments and penalties to the principal, and either increased monthly payments or added payments at the back end of the mortgage. If a borrower was in default already, what’s the chance the borrower can make a higher monthly payment?
What's this got to do with Iraq?
posted by kisch mokusch at 11:49 AM on February 5, 2009
posted by kisch mokusch at 11:49 AM on February 5, 2009
Basically, what he's implying is that by bailing out the banks, we're removing their incentive to bargain with mortgage holders by reducing their debt to make it closer to what they can pay, and what the current value of the property actually is.
Rather than split the loss in the mortgaged property's market value with the home owner, the banks would prefer to foreclose the home owner, and then get the taxpayers to bail them out for the nominal value of the mortgage -- what the home was "worth" back before the bubble burst.
That this leaves entire cities and towns in ruins -- as foreclosed homes bring down the value of neighboring homes, and newly homeless people overload society's safety nets, is of course not something that million-dollar bonus types concern themselves with. Not as long as you and I -- and our grandchildren -- are picking up the bill for the bankers' caviar.
posted by orthogonality at 11:50 AM on February 5, 2009 [45 favorites]
Rather than split the loss in the mortgaged property's market value with the home owner, the banks would prefer to foreclose the home owner, and then get the taxpayers to bail them out for the nominal value of the mortgage -- what the home was "worth" back before the bubble burst.
That this leaves entire cities and towns in ruins -- as foreclosed homes bring down the value of neighboring homes, and newly homeless people overload society's safety nets, is of course not something that million-dollar bonus types concern themselves with. Not as long as you and I -- and our grandchildren -- are picking up the bill for the bankers' caviar.
posted by orthogonality at 11:50 AM on February 5, 2009 [45 favorites]
Why are we still crucifying the bankers for these old mistakes? We need to look to the future and offer solutions that work.
posted by DU at 12:02 PM on February 5, 2009 [2 favorites]
posted by DU at 12:02 PM on February 5, 2009 [2 favorites]
Basically, what he's implying is that by bailing out the banks, we're removing their incentive to bargain with mortgage holders by reducing their debt to make it closer to what they can pay, and what the current value of the property actually is.
huh? did you read the same essay I did?
Rep. Miller is positing that the reason why mortgage holders i.e. banks are not renegotiating mortgage terms (even though it would be 'better' for the bank compared to foreclosure) is that the banks are functionally (if not officially) insolvent and trying to keep the value of the mortgage on their books for as long as possible... with the hope that no one will discover they are insolvent and the federal government takes away all the bad assets before their true value after foreclosure is put on the books.
He then compares it to embezzlement: banks have a lot of phoney money on their balance sheets as if someone had embezzled the cash but no one has discovered it. The banks are hoping the federal government will put that money back without anyone discovering the crime.
posted by geos at 12:05 PM on February 5, 2009 [26 favorites]
By overvaluing assets, the banks also make the situation appear better than it is. Bailing out the banks is an in for a penny in for a pound situation. The banks know that once they get that first $500,000,000,000, the U.S. government will give them more and more until the full depth of the abyss is realized.
The United States government will be nickel-and-dimed to death a few hundred billion at a time.
posted by christonabike at 12:05 PM on February 5, 2009 [4 favorites]
The United States government will be nickel-and-dimed to death a few hundred billion at a time.
posted by christonabike at 12:05 PM on February 5, 2009 [4 favorites]
That was a pretty great piece, orthogonality. Thanks.
posted by cowbellemoo at 12:09 PM on February 5, 2009
posted by cowbellemoo at 12:09 PM on February 5, 2009
We need to look to the future and offer solutions that work.
I agree. Let's start with severe punative measures.
posted by Blazecock Pileon at 12:13 PM on February 5, 2009 [17 favorites]
I agree. Let's start with severe punative measures.
posted by Blazecock Pileon at 12:13 PM on February 5, 2009 [17 favorites]
geos and christonabike have both angles covered:
1) A lot of major banks are insolvent if their assets are valued fairly. So they value their assets much higher than fair value to appear solvent long enough for a government bailout to save them.
2) If the banks had come out at the beginning and said "we need 2.5 trillion dollars or we'll go under", they would have been nationalized. But if they lie about the value of their assets and it appears they "only" need a few hundred billion, it's more palatable to bail them out. But they can gradually keep recognizing losses which they already know about but refuse to recognize and asking for a couple hundred billion more at a time.
Remember, if you owe the bank a thousand dollars, the bank owns you. If you owe the bank a billion dollars, you own the bank. If the bank owes you five hundred billion dollars, the bank owns your whole country.
posted by Justinian at 12:13 PM on February 5, 2009 [19 favorites]
1) A lot of major banks are insolvent if their assets are valued fairly. So they value their assets much higher than fair value to appear solvent long enough for a government bailout to save them.
2) If the banks had come out at the beginning and said "we need 2.5 trillion dollars or we'll go under", they would have been nationalized. But if they lie about the value of their assets and it appears they "only" need a few hundred billion, it's more palatable to bail them out. But they can gradually keep recognizing losses which they already know about but refuse to recognize and asking for a couple hundred billion more at a time.
Remember, if you owe the bank a thousand dollars, the bank owns you. If you owe the bank a billion dollars, you own the bank. If the bank owes you five hundred billion dollars, the bank owns your whole country.
posted by Justinian at 12:13 PM on February 5, 2009 [19 favorites]
22 more years on mine. I wouldn't refinance (right now) if you paid me and they ARE trying to pay me to refinance. Let me know if interest rates on 30yr fixed drop below 4%.
posted by winks007 at 12:15 PM on February 5, 2009
posted by winks007 at 12:15 PM on February 5, 2009
Shouldn't the goverment be doing credit-worthiness checks on the banks prior to giving them our money?
posted by winks007 at 12:17 PM on February 5, 2009
posted by winks007 at 12:17 PM on February 5, 2009
Basically, what he's implying is that by bailing out the banks, we're removing their incentive to bargain with mortgage holders by reducing their debt to make it closer to what they can pay, and what the current value of the property actually is.
As indicated above, not even. These banks are going down and the idea is to continue to carry these mortgages on the books until the last minute. There's not enough FDIC regulators to get in there to see this yet.
The worst is yet to come. I think Obama's election has kept the panic at bay. If the Republicans stop the stimulus, the bottom will fall right out of the bank stocks. That will trigger a bigger drop in the stock market as a whole.
posted by Ironmouth at 12:20 PM on February 5, 2009
As indicated above, not even. These banks are going down and the idea is to continue to carry these mortgages on the books until the last minute. There's not enough FDIC regulators to get in there to see this yet.
The worst is yet to come. I think Obama's election has kept the panic at bay. If the Republicans stop the stimulus, the bottom will fall right out of the bank stocks. That will trigger a bigger drop in the stock market as a whole.
posted by Ironmouth at 12:20 PM on February 5, 2009
Along related lines, Bank of America stocks tanked today, reportedly on nationalization fears.
Isn't there's something slightly ironic (or is it just apt?) about the possible nationalization of a so-called "Bank of America"?
posted by saulgoodman at 12:23 PM on February 5, 2009 [4 favorites]
Isn't there's something slightly ironic (or is it just apt?) about the possible nationalization of a so-called "Bank of America"?
posted by saulgoodman at 12:23 PM on February 5, 2009 [4 favorites]
the bottom will fall right out of the bank stocks
Bottom? Citi and BofA are getting darn near close to zero. I guess you're right that they could go down to penny stock status.
I'm still clutching a couple hundred BofA shares because, hell, at this point they're basically worthless anyway so I'd rather have the grim satisfaction of personally benefitting (albeit in a small way) from an ill-conceived money grab bank bailout than recoup a grand or whatever. This way either I'm happy because we nationalized BofA and it is good for the country or, hey, the country is fucked but you bastards just sent me a nice check so whatever.
posted by Justinian at 12:24 PM on February 5, 2009
Bottom? Citi and BofA are getting darn near close to zero. I guess you're right that they could go down to penny stock status.
I'm still clutching a couple hundred BofA shares because, hell, at this point they're basically worthless anyway so I'd rather have the grim satisfaction of personally benefitting (albeit in a small way) from an ill-conceived money grab bank bailout than recoup a grand or whatever. This way either I'm happy because we nationalized BofA and it is good for the country or, hey, the country is fucked but you bastards just sent me a nice check so whatever.
posted by Justinian at 12:24 PM on February 5, 2009
Why are we still crucifying the bankers for these old mistakes? We need to look to the future and offer solutions that work.
DU,
I'm not questioning the sincerity of your comment - but it reminds me horribly of how some teenagers react when you bring up that incredibly stupid thing they did yesterday.
The adult isn't always trying to rake over old crap for the fun of it - but attempting to find out if any lesson has sunk in at all. It's very hard to move on when you grimly suspect the future is going to throw up variations of the same basic idiocy.
posted by Jody Tresidder at 12:24 PM on February 5, 2009 [1 favorite]
DU,
I'm not questioning the sincerity of your comment - but it reminds me horribly of how some teenagers react when you bring up that incredibly stupid thing they did yesterday.
The adult isn't always trying to rake over old crap for the fun of it - but attempting to find out if any lesson has sunk in at all. It's very hard to move on when you grimly suspect the future is going to throw up variations of the same basic idiocy.
posted by Jody Tresidder at 12:24 PM on February 5, 2009 [1 favorite]
Jody Tresidder: Knowing DU's history around here, I'm pretty sure he was being all ironical and stuff.
posted by saulgoodman at 12:27 PM on February 5, 2009
posted by saulgoodman at 12:27 PM on February 5, 2009
Sorry for being dense (thanks saulgoodman).
posted by Jody Tresidder at 12:42 PM on February 5, 2009
posted by Jody Tresidder at 12:42 PM on February 5, 2009
I wouldn't refinance (right now) if you paid me and they ARE trying to pay me to refinance
I gotta tell you, though, that $15k tax credit that might become available to homebuyers sure is tempting.
posted by uncleozzy at 12:43 PM on February 5, 2009
I gotta tell you, though, that $15k tax credit that might become available to homebuyers sure is tempting.
posted by uncleozzy at 12:43 PM on February 5, 2009
Are we not overlooking an element of moral hazard?
Banks resist modifying mortgage terms because there's a danger that if borrowers see delinquent mortgages being modified downwards they will purposefully become delinquent. No?
Not that I don't see the argument made by the gentleman from North Carolina, but it seems there are many more shades of gray here (as always).
posted by jckll at 12:45 PM on February 5, 2009
Banks resist modifying mortgage terms because there's a danger that if borrowers see delinquent mortgages being modified downwards they will purposefully become delinquent. No?
Not that I don't see the argument made by the gentleman from North Carolina, but it seems there are many more shades of gray here (as always).
posted by jckll at 12:45 PM on February 5, 2009
From the article:
So who can we believe? Financial institutions’ own valuations of their assets? Standard & Poor’s computers? The price actually paid for an identical asset in a single recent transaction? Goldman Sachs’ economists? Dr. Doom?
I got really excited about the future of America until I found out that was also the pseudonym of some economist guy.
posted by Shepherd at 12:46 PM on February 5, 2009 [5 favorites]
So who can we believe? Financial institutions’ own valuations of their assets? Standard & Poor’s computers? The price actually paid for an identical asset in a single recent transaction? Goldman Sachs’ economists? Dr. Doom?
I got really excited about the future of America until I found out that was also the pseudonym of some economist guy.
posted by Shepherd at 12:46 PM on February 5, 2009 [5 favorites]
Interesting. I just went through this - trying to buy a house that had two mortgages on it and the seller in default on both of them. Even though it made way more logical sense for the banks to agree to a short sale, thereby making themselves some money and not ending up with a house they didn't want, they hemmed and hawed and freaked out and went back and forth for months. It was damn near miraculous when they finally (the day before the foreclosure auction) agreed to the short sale and when they did it all had to happen within 12 hours or the numbers would change again and that would be that. During all four months of this runaround, none of us could understand why the banks wouldn't take the money and run - why they were so reluctant to do something that eminently made so much sense from everyone's point of view. This article has made it all a lot clearer - ethically pretty much reprehensible, yes, but clearer.
posted by mygothlaundry at 12:48 PM on February 5, 2009 [8 favorites]
posted by mygothlaundry at 12:48 PM on February 5, 2009 [8 favorites]
um, i linked it here -- More on Bank Nationalization -- but ever since the fed started its repo facilities with indicated marks at 85¢ for 'triple-A' CDOs, people have been wondering if they weren't just hiding bodies and suspect that:
like the fed is probably seeing losses on the bear stearns' assets it acquired and hasn't been making out so well on the TARP either; everyone knows the system is effectively insolvent, why pretend otherwise? if you continue with the charade then the rot spreads, and if you don't then be prepared to either let (some of) them fail, take them over (full or partial nationalization) or _explicitly_ bail them out with taxpayer giveaways (and a management boot if they have any sense ;) but trying to 'covertly' ring fence or buy out at inflated marks troubled assets, while perhaps politically expedient over the short term, will just invite recrimination and poison the well down the road when taxpayer losses are slowly (and reluctantly) revealed -- like we're starting to see at maiden lane and TARP I -- as the banksters make their getaway...
posted by kliuless at 12:48 PM on February 5, 2009 [3 favorites]
There is still massive implicit accounting fraud going on. Senior management of all of these firms are completely aware that they are carrying bad assets on their books at inflated marks. It's happening virtually everywhere, including in hedge fund and private equity land.for me, as long as that suspicion obtains, there is no cure for the banking system; how do you diagnose what isn't revealed? whatever scheme is proposed, if it doesn't include full scale audits, strict asset assessment and transparency, no one is going to trust the banks -- as buffett sez: "Confidence in markets and institutions is like oxygen... when you have it you don't think about it... but you can't go 5 minutes without it."
The bad marks pervade everything. Nobody believes anyone's numbers -- because each person knows HE is lying, and so therefore he knows that everyone else is lying.
I remain absolutely convinced that one of the key reasons that liquidity has utterly vanished for a lot of these assets is that the people who own them don't actually WANT them to trade. If they trade, you see what they're really worth, and you have to mark them accurately or you really are committing fraud, and then it's clear that you're insolvent and you go kablooey. So best just to sit on the cancer and not talk about it.
like the fed is probably seeing losses on the bear stearns' assets it acquired and hasn't been making out so well on the TARP either; everyone knows the system is effectively insolvent, why pretend otherwise? if you continue with the charade then the rot spreads, and if you don't then be prepared to either let (some of) them fail, take them over (full or partial nationalization) or _explicitly_ bail them out with taxpayer giveaways (and a management boot if they have any sense ;) but trying to 'covertly' ring fence or buy out at inflated marks troubled assets, while perhaps politically expedient over the short term, will just invite recrimination and poison the well down the road when taxpayer losses are slowly (and reluctantly) revealed -- like we're starting to see at maiden lane and TARP I -- as the banksters make their getaway...
posted by kliuless at 12:48 PM on February 5, 2009 [3 favorites]
What a super fawk up! This whole bail out should be been handled so much more differently. Rich assholes in charge of these banks will keep doing the same shit that got us in this mess to begin with. Except now they get to do it with our money. We should have let them jump!!!!!! Fawking assholes.
posted by Mastercheddaar at 12:48 PM on February 5, 2009
posted by Mastercheddaar at 12:48 PM on February 5, 2009
And maybe they’re hoping we’ll buy their bezzle.
I think this is exactly correct. This is a politician with a clue.
posted by Malor at 12:48 PM on February 5, 2009
I think this is exactly correct. This is a politician with a clue.
posted by Malor at 12:48 PM on February 5, 2009
Yeah, Brad Miller's impressed me for a while.
posted by orthogonality at 12:54 PM on February 5, 2009
posted by orthogonality at 12:54 PM on February 5, 2009
There is another accession to the cause of peace and concord, which is also of great weight: I mean, that no citizen can have immovable property.—Spinoza, Political Treatise 7,8.posted by No Robots at 12:57 PM on February 5, 2009 [2 favorites]
I see - the banks are looking at a total wipe-out of their assets for the moral principle. A lesson to be taught to the uneducated and desperate about trusting what educated professionals tell them. Not an elaborate scam run on the consumer at one end and the investors (now the government) at the other, no, not at all.
Dude, the first clue that you're dealing with a bunko artist is that he rigs the game so it feels like it's your own fault for getting hoodwinked out of your life savings/house.
Bunko artists still go to jail, "moral hazard" or no.
posted by Slap*Happy at 12:59 PM on February 5, 2009 [3 favorites]
Dude, the first clue that you're dealing with a bunko artist is that he rigs the game so it feels like it's your own fault for getting hoodwinked out of your life savings/house.
Bunko artists still go to jail, "moral hazard" or no.
posted by Slap*Happy at 12:59 PM on February 5, 2009 [3 favorites]
(Umm, that was aimed at cklennon)
posted by Slap*Happy at 1:00 PM on February 5, 2009
posted by Slap*Happy at 1:00 PM on February 5, 2009
once again, the conservitive, sandwich-heavy portfolio pays off for the hungry investor!
posted by wayofthedodo at 1:05 PM on February 5, 2009 [11 favorites]
posted by wayofthedodo at 1:05 PM on February 5, 2009 [11 favorites]
I see - the banks are looking at a total wipe-out of their assets for the moral principle. A lesson to be taught to the uneducated and desperate about trusting what educated professionals tell them. Not an elaborate scam run on the consumer at one end and the investors (now the government) at the other, no, not at all.
Dude, the first clue that you're dealing with a bunko artist is that he rigs the game so it feels like it's your own fault for getting hoodwinked out of your life savings/house.
Bunko artists still go to jail, "moral hazard" or no.
Huh?
posted by jckll at 1:08 PM on February 5, 2009
Dude, the first clue that you're dealing with a bunko artist is that he rigs the game so it feels like it's your own fault for getting hoodwinked out of your life savings/house.
Bunko artists still go to jail, "moral hazard" or no.
Huh?
posted by jckll at 1:08 PM on February 5, 2009
uncleozzy, that 15k is probably for 1st time buyers. Things like that never apply to existing customers(think about all of the "new" plans for "new" cell phone customers.) We've already been hooked and what incentive is there for a bank to charge me less of something that I'm already paying them? Plus about 36k of my loan is backed by Uncle Sam and I think, deep down inside, the bank would love to get that from someone who defaults.
Still the statisitic about only 10%(in November) getting a smaller note is very upsetting.
posted by winks007 at 1:20 PM on February 5, 2009
Still the statisitic about only 10%(in November) getting a smaller note is very upsetting.
posted by winks007 at 1:20 PM on February 5, 2009
huh? did you read the same essay I did?
Rep. Miller is positing that the reason why mortgage holders i.e. banks are not renegotiating mortgage terms (even though it would be 'better' for the bank compared to foreclosure) is that the banks are functionally (if not officially) insolvent and trying to keep the value of the mortgage on their books for as long as possible... with the hope that no one will discover they are insolvent and the federal government takes away all the bad assets before their true value after foreclosure is put on the books.
I'm sure he did read the same essay. The point is that when a bank fraudulently inflates its assets, there must be a willing buyer. One who is prepared to ignore the deception and pay top dollar for these defunct assets. In this way, the bailouts enable and encourage bad behavior.
I'm not sure it's any more outrageous this way. The bailout's purpose is to pump money into the banks - did anyone expect the "more solvent" banks to be given preference?
posted by yath at 1:26 PM on February 5, 2009
Rep. Miller is positing that the reason why mortgage holders i.e. banks are not renegotiating mortgage terms (even though it would be 'better' for the bank compared to foreclosure) is that the banks are functionally (if not officially) insolvent and trying to keep the value of the mortgage on their books for as long as possible... with the hope that no one will discover they are insolvent and the federal government takes away all the bad assets before their true value after foreclosure is put on the books.
I'm sure he did read the same essay. The point is that when a bank fraudulently inflates its assets, there must be a willing buyer. One who is prepared to ignore the deception and pay top dollar for these defunct assets. In this way, the bailouts enable and encourage bad behavior.
I'm not sure it's any more outrageous this way. The bailout's purpose is to pump money into the banks - did anyone expect the "more solvent" banks to be given preference?
posted by yath at 1:26 PM on February 5, 2009
uncleozzy, that 15k is probably for 1st time buyers
Well, new buyers, at least--supposedly they're removing the first-time buyer restriction and repayment on the current $7,500 credit... if this version goes to the President's desk. Although there is talk of subsidized 4% loans that might be available for refinancing, too. Either way, I'm not sure that more home ownership is the solution here, but I'll sure consider taking advantage of it if it's there.
posted by uncleozzy at 1:27 PM on February 5, 2009
Well, new buyers, at least--supposedly they're removing the first-time buyer restriction and repayment on the current $7,500 credit... if this version goes to the President's desk. Although there is talk of subsidized 4% loans that might be available for refinancing, too. Either way, I'm not sure that more home ownership is the solution here, but I'll sure consider taking advantage of it if it's there.
posted by uncleozzy at 1:27 PM on February 5, 2009
even though we just refinanced to pay off other debts, i'm not too proud to sign up again if the 4% rate deal comes through. unfortunately, we've been in our house for something like 8 years, so we won't qualify for the credit in any event.
posted by saulgoodman at 1:36 PM on February 5, 2009
posted by saulgoodman at 1:36 PM on February 5, 2009
Shouldn't the goverment be doing credit-worthiness checks on the banks prior to giving them our money?
It doesn't help that S&P, Moody's and co. are pretty much totally corrupt. Do you think those bastards really didn't know?
posted by mobunited at 1:41 PM on February 5, 2009 [2 favorites]
It doesn't help that S&P, Moody's and co. are pretty much totally corrupt. Do you think those bastards really didn't know?
posted by mobunited at 1:41 PM on February 5, 2009 [2 favorites]
An ignoble spirit embiggens embezels the smallest man.
posted by zippy at 1:52 PM on February 5, 2009
posted by zippy at 1:52 PM on February 5, 2009
elizabeth warren is kicking ass and taking names! [1,2]
posted by kliuless at 2:00 PM on February 5, 2009 [2 favorites]
posted by kliuless at 2:00 PM on February 5, 2009 [2 favorites]
In this episode of Darth Vader, federal bailed out bank auditor:
Vader: "Okay, you did what now?"
Bank president: "Well Lord Vader, I consistently refused to renegotiate mortgage terms because this bank is pretty much insolvent and I was trying to keep the value of those mortgages on the books for as long as possible with the hope that no one will discover we are insolvent and that the federal government will take tax money from those people who I decided not to renegotiate with and give it to me because I have so many bad mortgages on my books."
Vader: *force chokes that motherfucker out*
Vader, to Bank Vice-president: "You are in command now. Do that shit again. See what happens."
posted by ND¢ at 2:19 PM on February 5, 2009 [12 favorites]
Vader: "Okay, you did what now?"
Bank president: "Well Lord Vader, I consistently refused to renegotiate mortgage terms because this bank is pretty much insolvent and I was trying to keep the value of those mortgages on the books for as long as possible with the hope that no one will discover we are insolvent and that the federal government will take tax money from those people who I decided not to renegotiate with and give it to me because I have so many bad mortgages on my books."
Vader: *force chokes that motherfucker out*
Vader, to Bank Vice-president: "You are in command now. Do that shit again. See what happens."
posted by ND¢ at 2:19 PM on February 5, 2009 [12 favorites]
I believe that $15k applies to anyone who buys a home in the next year. It need not be the first home you've bought, and it need not be a new home.
This made me think: hmm, why don't I have my significant other sell me the house for $150k (the deal is 10%, up to a max of $15k so you need a $150k+ home), then I take that nice gubment check and bank it or buy gold and silver with it. We'd still have the house (now in my name, but that doesn't matter as long as our wills are current), and we'd have an extra $15k too.
We ultimately decided neither of us wanted to deal with all the hassle in order to make this possible (and said hassle would be considerable). Still, an extra $15k would definitely be a decent boost to *our* economy. I mention it here in case someone else is in a similar situation who might find the money to be worth the hassle.
posted by jamstigator at 2:30 PM on February 5, 2009 [1 favorite]
This made me think: hmm, why don't I have my significant other sell me the house for $150k (the deal is 10%, up to a max of $15k so you need a $150k+ home), then I take that nice gubment check and bank it or buy gold and silver with it. We'd still have the house (now in my name, but that doesn't matter as long as our wills are current), and we'd have an extra $15k too.
We ultimately decided neither of us wanted to deal with all the hassle in order to make this possible (and said hassle would be considerable). Still, an extra $15k would definitely be a decent boost to *our* economy. I mention it here in case someone else is in a similar situation who might find the money to be worth the hassle.
posted by jamstigator at 2:30 PM on February 5, 2009 [1 favorite]
So why the heck am I still contributing to my 401k? Seriously, I let it ride for a while, but is there any reason to assume my fund manager will even stay in business? I'll take a hit, but then, I'll at least keep more of my income for now.
posted by emjaybee at 2:38 PM on February 5, 2009
posted by emjaybee at 2:38 PM on February 5, 2009
That banks are in this mess is still unbelievable to me. The proliferation of fees that they've instituted in the last twenty years, by themselves, should've kept them rolling in the green until the end of days. Fees to use your checking account, fees to use the ATM, fees to get paper bills, credit card late fees (that they charge if you are 1 minute late, not 30 days !!??), overdraft fees, retroactive credit card interest rate hikes for any reason they can think of (apparently usury laws don't apply to them, either), etc.,etc. They killed float time on checks if you're writing them, but increased the float if you're cashing them. My bank now will not credit deposited checks to my account for two days; I get a "complimentary credit" (yes, they actually call it that) of $100 against the deposit until they clear it.
If they can't succeed on the tilted field they've created, they're not just criminal - they're criminally stupid.
posted by Benny Andajetz at 3:10 PM on February 5, 2009 [18 favorites]
If they can't succeed on the tilted field they've created, they're not just criminal - they're criminally stupid.
posted by Benny Andajetz at 3:10 PM on February 5, 2009 [18 favorites]
So why the heck am I still contributing to my 401k?
I have asked myself that exact question so many times over the last four months. There doesn't seem to be any direct benefit as nothing is purchased in the name of the person funding the 401k. What's in it for us if the fund falls over?
posted by Kikkoman at 3:47 PM on February 5, 2009
I have asked myself that exact question so many times over the last four months. There doesn't seem to be any direct benefit as nothing is purchased in the name of the person funding the 401k. What's in it for us if the fund falls over?
posted by Kikkoman at 3:47 PM on February 5, 2009
When Washington was buying pieces of banks last year, it may have overpaid, by as much as 30 percent.
posted by oaf at 3:47 PM on February 5, 2009
posted by oaf at 3:47 PM on February 5, 2009
When Washington was buying pieces of banks last year, it may have overpaid, by as much as 30 percent.
This is my surprised face.
Actually, if it turns out to be as little as 30 percent, I will be very surprised.
posted by Justinian at 3:49 PM on February 5, 2009
This is my surprised face.
Actually, if it turns out to be as little as 30 percent, I will be very surprised.
posted by Justinian at 3:49 PM on February 5, 2009
So why the heck am I still contributing to my 401k? Seriously, I let it ride for a while, but is there any reason to assume my fund manager will even stay in business? I'll take a hit, but then, I'll at least keep more of my income for now.
In your 401k, your funds are fully vested. They are not lent out as deposits. If your fund manager "goes under" your money is 100% there and not susceptible to recovery by creditors, the government, or anyone else. Don't stoke panic.
posted by jckll at 4:20 PM on February 5, 2009
In your 401k, your funds are fully vested. They are not lent out as deposits. If your fund manager "goes under" your money is 100% there and not susceptible to recovery by creditors, the government, or anyone else. Don't stoke panic.
posted by jckll at 4:20 PM on February 5, 2009
A couple of weeks ago, the Economist offered an intriguing way out of this quandary: A Slice of Danish. Interesting from a game-theory point of view, too...
posted by Skeptic at 4:31 PM on February 5, 2009
posted by Skeptic at 4:31 PM on February 5, 2009
Benny Andajetz wrote:
The proliferation of fees that they've instituted in the last twenty years, by themselves, should've kept them rolling in the green until the end of days. Fees to use your checking account, fees to use the ATM, fees to get paper bills, credit card late fees (that they charge if you are 1 minute late, not 30 days !!??), overdraft fees, retroactive credit card interest rate hikes for any reason they can think of (apparently usury laws don't apply to them, either), etc.,etc
To quote the Godfather, "You know you got to stop them at the beginning, like they should have stopped Hitler at Munich, They should never've let him get away with that. ..." This is why you must "resist the beginnings" we all knew those fees were bullshit but we all just sat back and took it and took it and the banks kept reaching and reaching until they finally overreached.
posted by any major dude at 5:07 PM on February 5, 2009
The proliferation of fees that they've instituted in the last twenty years, by themselves, should've kept them rolling in the green until the end of days. Fees to use your checking account, fees to use the ATM, fees to get paper bills, credit card late fees (that they charge if you are 1 minute late, not 30 days !!??), overdraft fees, retroactive credit card interest rate hikes for any reason they can think of (apparently usury laws don't apply to them, either), etc.,etc
To quote the Godfather, "You know you got to stop them at the beginning, like they should have stopped Hitler at Munich, They should never've let him get away with that. ..." This is why you must "resist the beginnings" we all knew those fees were bullshit but we all just sat back and took it and took it and the banks kept reaching and reaching until they finally overreached.
posted by any major dude at 5:07 PM on February 5, 2009
quoth amd: "we all knew those fees were bullshit but we all just sat back and took it and took it and the banks kept reaching and reaching until they finally overreached."
Speak for yourself, I've never had a bank account. Credit unions rock, I frankly pity the fools who don't use them.
posted by mullingitover at 5:12 PM on February 5, 2009 [1 favorite]
Speak for yourself, I've never had a bank account. Credit unions rock, I frankly pity the fools who don't use them.
posted by mullingitover at 5:12 PM on February 5, 2009 [1 favorite]
Thank goodness he is not the same Brad Miller, who as an Appalachian Trail thru-hiker went spelunking with me during an extended Blue Blaze adventure and subsequently married his sweetheart and finished his scientific education in North Carolina. Wherever "my" Brad is I want to hold on to the image of a smarter, kinder man.
posted by maggieb at 5:18 PM on February 5, 2009
posted by maggieb at 5:18 PM on February 5, 2009
In your 401k, your funds are fully vested. They are not lent out as deposits. If your fund manager "goes under" your money is 100% there and not susceptible to recovery by creditors, the government, or anyone else. Don't stoke panic.
The radical inflation or deflation that is going to happen in the near future is going to render those saved dollars nigh worthless over the long term. IMO one is better off at this point to be purchasing things that you actually need and will use for a long time — furniture, a car, whatever you haven't currently got — than to save for retirement.
We have not seen the entire tip of the iceberg, let alone the 90% that has remained hidden underwater. The economic crisis is going to make the Great Depression look like a fucking cakewalk. The USA is bankrupt, just like Iceland, Britain, Italy, and probably Germany.
We. Are. Fucked.
posted by five fresh fish at 5:59 PM on February 5, 2009
The radical inflation or deflation that is going to happen in the near future is going to render those saved dollars nigh worthless over the long term. IMO one is better off at this point to be purchasing things that you actually need and will use for a long time — furniture, a car, whatever you haven't currently got — than to save for retirement.
We have not seen the entire tip of the iceberg, let alone the 90% that has remained hidden underwater. The economic crisis is going to make the Great Depression look like a fucking cakewalk. The USA is bankrupt, just like Iceland, Britain, Italy, and probably Germany.
We. Are. Fucked.
posted by five fresh fish at 5:59 PM on February 5, 2009
Investments in a 401k are actually a fairly good inflation hedge; the value of the assets in your 401k inflate along with everything else. Ditto real estate.
posted by Justinian at 6:22 PM on February 5, 2009
posted by Justinian at 6:22 PM on February 5, 2009
The more invested you are in the deception, the bigger profits that can be gained.
There are still plenty of people who actually make or do things—real things, not paper things—things that cost money and pay money. It's not all smoke and mirrors. But the higher up you get, the bigger the stakes and the bigger the assholes who will fuck you, your mother, your grandmother and her horse rather than give up one single iota of their shit. In fact, they're doing everything they can to leverage their influence to steal your hard-earned shit. That's their job. That's what they pay themselves to do. To professionally, studiously fuck you over. Used to be, society didn't look too favorably on usury. Used to be, people who fucked over the general public got themselves covered in burning liquid tar that seared into their flesh, then covered in feathers and paraded down Main St.
There's nothing different about this economy now than there was two years ago, except for two very important things. The first is that the people who control the flow of money—the bankers—are effectively holding the faucets closed. The second is that public confidence and perception have never been more influential than these past few months—we've seen it turn stocks into fancy toilet paper overnight. If our new president expects to have any chance of pulling us out of this clusterfuck, it's going to have to appeal to the average person in a deeply visceral way or it simply won't work.
Throwing more money at bankers, by the way, isn't how you win the hearts and minds of the American people.
posted by Civil_Disobedient at 6:40 PM on February 5, 2009 [4 favorites]
There are still plenty of people who actually make or do things—real things, not paper things—things that cost money and pay money. It's not all smoke and mirrors. But the higher up you get, the bigger the stakes and the bigger the assholes who will fuck you, your mother, your grandmother and her horse rather than give up one single iota of their shit. In fact, they're doing everything they can to leverage their influence to steal your hard-earned shit. That's their job. That's what they pay themselves to do. To professionally, studiously fuck you over. Used to be, society didn't look too favorably on usury. Used to be, people who fucked over the general public got themselves covered in burning liquid tar that seared into their flesh, then covered in feathers and paraded down Main St.
There's nothing different about this economy now than there was two years ago, except for two very important things. The first is that the people who control the flow of money—the bankers—are effectively holding the faucets closed. The second is that public confidence and perception have never been more influential than these past few months—we've seen it turn stocks into fancy toilet paper overnight. If our new president expects to have any chance of pulling us out of this clusterfuck, it's going to have to appeal to the average person in a deeply visceral way or it simply won't work.
Throwing more money at bankers, by the way, isn't how you win the hearts and minds of the American people.
posted by Civil_Disobedient at 6:40 PM on February 5, 2009 [4 favorites]
The radical inflation or deflation that is going to happen in the near future is going to render those saved dollars nigh worthless over the long term. IMO one is better off at this point to be purchasing things that you actually need and will use for a long time — furniture, a car, whatever you haven't currently got — than to save for retirement.
We have not seen the entire tip of the iceberg, let alone the 90% that has remained hidden underwater. The economic crisis is going to make the Great Depression look like a fucking cakewalk. The USA is bankrupt, just like Iceland, Britain, Italy, and probably Germany.
We. Are. Fucked.
God I hope people aren't getting their personal investment advice here. So much uninformed nonsense, FUD and chicken-little-speak. Unless you ARE retired, or are heavily invested in fixed-income, 401k and IRA vehicles are two of the best ways to guard against inflation.
Not saying that the problems we are having aren't serious, but if you think the United States economy is going to disappear off the face of the earth you are sorely mistaken. The doomsayers are the same today as they were last year: mostly wrong. It's just that now there are more of them and more people listening to them.
posted by jckll at 6:45 PM on February 5, 2009
We have not seen the entire tip of the iceberg, let alone the 90% that has remained hidden underwater. The economic crisis is going to make the Great Depression look like a fucking cakewalk. The USA is bankrupt, just like Iceland, Britain, Italy, and probably Germany.
We. Are. Fucked.
God I hope people aren't getting their personal investment advice here. So much uninformed nonsense, FUD and chicken-little-speak. Unless you ARE retired, or are heavily invested in fixed-income, 401k and IRA vehicles are two of the best ways to guard against inflation.
Not saying that the problems we are having aren't serious, but if you think the United States economy is going to disappear off the face of the earth you are sorely mistaken. The doomsayers are the same today as they were last year: mostly wrong. It's just that now there are more of them and more people listening to them.
posted by jckll at 6:45 PM on February 5, 2009
The doomsayers are the same today as they were last year: mostly wrong.
I know, real estate never goes down. LOL!
posted by stet at 7:52 PM on February 5, 2009 [1 favorite]
I know, real estate never goes down. LOL!
posted by stet at 7:52 PM on February 5, 2009 [1 favorite]
Those of us who have been consistently saying that we're in far worse trouble than it appears, that the game of pushing IOUs around has replaced a very great deal of productive endeavor, were absolutely correct. As a whole, the country has taken on obligations as though that paper-pushing was real money, was actually something you could hold and use, instead of being debt and abstractions of debt.
The game is changing. That system is failing, because the real economy can't sustain any more debt. And, as we discover that the existing debts are no good, the failures cascade. The virtuous cycle on the way up, of IOUs making a great circle through the financial system, getting magnified with each cycle, has turned into a vicious cycle on the way down.
This is the aftermath of a bubble. Everything breaks. Everything falls apart. The things you thought were certain, aren't. This was a far larger bubble (actually, THREE) than the one immediately preceding the Great Depression, and the consequences will be even more dire.
Now that we've finally realized we're in trouble -- instead of ten years ago, when it was completely obvious that we were going into bubble territory -- we're trying something that's never been tried before. This time around, to avoid the Second Great Depression, we're pulling out all the stops to try to keep the existing system together. The problem with this is that the existing system is a Ponzi scheme. Any amount of money that we sink into that morass is lost, because the economic model doesn't work over the long term. The bailouts just let bankers skate free of the mess they've made, while we all pay their bills.
Without learning that swapping ever-larger IOUs does not substitute for real economic growth, we will never get healthy again. The financial system as presently constituted is not symbiotic with the economy. It is parasitic. To the extent that we try to treat our enormous debt problem with the issuance of more debt, with the preservation of existing financial institutions and methods, we will only get sicker.
If they keep up with the bailouts, and I expect they will, eventually, large sections of the country are going to look like Detroit. Instead of the Second Great Depression, we'll have the Great Stagflation, and it's going to be a lot worse than a mere depression would have been.
posted by Malor at 8:08 PM on February 5, 2009 [7 favorites]
The game is changing. That system is failing, because the real economy can't sustain any more debt. And, as we discover that the existing debts are no good, the failures cascade. The virtuous cycle on the way up, of IOUs making a great circle through the financial system, getting magnified with each cycle, has turned into a vicious cycle on the way down.
This is the aftermath of a bubble. Everything breaks. Everything falls apart. The things you thought were certain, aren't. This was a far larger bubble (actually, THREE) than the one immediately preceding the Great Depression, and the consequences will be even more dire.
Now that we've finally realized we're in trouble -- instead of ten years ago, when it was completely obvious that we were going into bubble territory -- we're trying something that's never been tried before. This time around, to avoid the Second Great Depression, we're pulling out all the stops to try to keep the existing system together. The problem with this is that the existing system is a Ponzi scheme. Any amount of money that we sink into that morass is lost, because the economic model doesn't work over the long term. The bailouts just let bankers skate free of the mess they've made, while we all pay their bills.
Without learning that swapping ever-larger IOUs does not substitute for real economic growth, we will never get healthy again. The financial system as presently constituted is not symbiotic with the economy. It is parasitic. To the extent that we try to treat our enormous debt problem with the issuance of more debt, with the preservation of existing financial institutions and methods, we will only get sicker.
If they keep up with the bailouts, and I expect they will, eventually, large sections of the country are going to look like Detroit. Instead of the Second Great Depression, we'll have the Great Stagflation, and it's going to be a lot worse than a mere depression would have been.
posted by Malor at 8:08 PM on February 5, 2009 [7 favorites]
All I can say is duh.
Now what should we do about it?
posted by saysthis at 8:14 PM on February 5, 2009
Now what should we do about it?
posted by saysthis at 8:14 PM on February 5, 2009
Yeah, Brad Miller's impressed me for a while.
Well, he's in a pretty safe seat, so he *should* be out front more often than he has been. He was the lead guy in charge of NC's last round of redistricting, which meant that he was actually in charge of drawing the district he was about to run for. Funny, that. He was also one of the first folks to decline to run against Elizabeth Dole back when it took guts to decide to run against Elizabeth Dole. Kay Hagan stepped up to the plate instead.
In short, Brad Miller's a so-far OK politician who could be a lot better.
posted by mediareport at 8:53 PM on February 5, 2009
Well, he's in a pretty safe seat, so he *should* be out front more often than he has been. He was the lead guy in charge of NC's last round of redistricting, which meant that he was actually in charge of drawing the district he was about to run for. Funny, that. He was also one of the first folks to decline to run against Elizabeth Dole back when it took guts to decide to run against Elizabeth Dole. Kay Hagan stepped up to the plate instead.
In short, Brad Miller's a so-far OK politician who could be a lot better.
posted by mediareport at 8:53 PM on February 5, 2009
mullingitover wrote:
Speak for yourself, I've never had a bank account. Credit unions rock, I frankly pity the fools who don't use them.
When I said "we" I was talking about the people who knew better yet still remained silent thinking it would only affect the ignorant and would never affect us. Well, who do you think is going to get hurt the most from this coming depression? Us, the fiscally responsible. The rich and the poor are going to get their bailouts come Tuesday. We, the middle class are going to pay for it. My point is that we should speak out when we see injustice - even when it's not harming us personally because if it goes on too long it always will.
posted by any major dude at 8:55 PM on February 5, 2009 [3 favorites]
Speak for yourself, I've never had a bank account. Credit unions rock, I frankly pity the fools who don't use them.
When I said "we" I was talking about the people who knew better yet still remained silent thinking it would only affect the ignorant and would never affect us. Well, who do you think is going to get hurt the most from this coming depression? Us, the fiscally responsible. The rich and the poor are going to get their bailouts come Tuesday. We, the middle class are going to pay for it. My point is that we should speak out when we see injustice - even when it's not harming us personally because if it goes on too long it always will.
posted by any major dude at 8:55 PM on February 5, 2009 [3 favorites]
Melodies derived from stock charts (including Lehman Brothers, Bank of America, Warner Music Group, and the US national debt) arranged with Songsmith.
posted by Bora Horza Gobuchul at 9:51 PM on February 5, 2009
posted by Bora Horza Gobuchul at 9:51 PM on February 5, 2009
What Malor said.
The bubble that is bursting: virtual wealth. Wealth based not on real valuations of tangible goods and services, but instead based upon fantastical imaginings of derivatives of the nth degree. Mathematical constructs based on theories, not facts. All sizzle, no steak.
We have been lied to. Wall Street has successfully created money from thin air, and used it to make themselves billionaires.
Let the bubble pop.
posted by five fresh fish at 10:13 PM on February 5, 2009 [1 favorite]
The bubble that is bursting: virtual wealth. Wealth based not on real valuations of tangible goods and services, but instead based upon fantastical imaginings of derivatives of the nth degree. Mathematical constructs based on theories, not facts. All sizzle, no steak.
We have been lied to. Wall Street has successfully created money from thin air, and used it to make themselves billionaires.
Let the bubble pop.
posted by five fresh fish at 10:13 PM on February 5, 2009 [1 favorite]
[B]anks have a lot of phoney money on their balance sheets as if someone had embezzled the cash but no one has discovered it. The banks are hoping the federal government will put that money back without anyone discovering the crime.
That's exactly the plot in India's biggest corporate scandal. It's almost as if we imported Wall Street and not Silicon Valley into India.
posted by the cydonian at 10:57 PM on February 5, 2009
That's exactly the plot in India's biggest corporate scandal. It's almost as if we imported Wall Street and not Silicon Valley into India.
posted by the cydonian at 10:57 PM on February 5, 2009
The doomsayers are the same today as they were last year: mostly wrong.
No, you don't understand.
The doomsayers have actually been mostly right, because most of the reasons for the actual doom saying involve very simple principles of basic economics. Now, for some strange reason, these principals somehow haven't applied to the United States or its large corporate institutions—I'm sure that has nothing to do with the perpetual hand-outs, tax-breaks, and pork-barrel pocket-lining that has been handed out by Washington since Reagan took office.
The people who were doomsaying ten and twenty years ago were just as right as the ones today, only the ones today have ten or twenty more years of data to go on, which is why people are starting to panic. Because eventually, someone is going to want to check the figures. And as the truth reveals itself slowly and surely, as the fuzzy numbers get more concrete they somehow seem to drop dramatically. "Oh sure, our banks are worth trillions… I meant hundreds of billions… well, surely a couple billion, right? Say, uh… can you spot me $5 for lunch today?"
Economic Pollyanna's have been walking around for the past thirty years loudly and proudly proclaiming the emperor not only has a great wardrobe, but that they're so inherently confident in his tailor that they're not even going to bother to look at the clothes. It's fucking absurd.
posted by Civil_Disobedient at 4:29 AM on February 6, 2009 [3 favorites]
No, you don't understand.
The doomsayers have actually been mostly right, because most of the reasons for the actual doom saying involve very simple principles of basic economics. Now, for some strange reason, these principals somehow haven't applied to the United States or its large corporate institutions—I'm sure that has nothing to do with the perpetual hand-outs, tax-breaks, and pork-barrel pocket-lining that has been handed out by Washington since Reagan took office.
The people who were doomsaying ten and twenty years ago were just as right as the ones today, only the ones today have ten or twenty more years of data to go on, which is why people are starting to panic. Because eventually, someone is going to want to check the figures. And as the truth reveals itself slowly and surely, as the fuzzy numbers get more concrete they somehow seem to drop dramatically. "Oh sure, our banks are worth trillions… I meant hundreds of billions… well, surely a couple billion, right? Say, uh… can you spot me $5 for lunch today?"
Economic Pollyanna's have been walking around for the past thirty years loudly and proudly proclaiming the emperor not only has a great wardrobe, but that they're so inherently confident in his tailor that they're not even going to bother to look at the clothes. It's fucking absurd.
posted by Civil_Disobedient at 4:29 AM on February 6, 2009 [3 favorites]
Insuring Bankers’ Bonuses - "We are, in effect, insuring incompetents (i.e., the executives who got us into this mess) against both the delayed consequences of previous bungling by themselves and any future missteps they may make."
A "New" Bailout Plan? Hardly - "It seems as if the discussion among those in power has gone back to what we had during Bush II, injecting capital into sick institutions, yet on 'tougher' terms than we had previously. Simply doing more of something that was flawed from the beginning isn't going to help solve the problem any better. Why the brainy President Obama or the equally brainy Larry Summers don't seem to get this is beyond me... President Obama has his chance to take a stand, the right stand, and I'm afraid his first big step forward will in fact be two steps backwards. And the country will suffer for it."
Bailout Talks Turn to More Equity Stakes
cheers!
posted by kliuless at 7:26 AM on February 6, 2009
A "New" Bailout Plan? Hardly - "It seems as if the discussion among those in power has gone back to what we had during Bush II, injecting capital into sick institutions, yet on 'tougher' terms than we had previously. Simply doing more of something that was flawed from the beginning isn't going to help solve the problem any better. Why the brainy President Obama or the equally brainy Larry Summers don't seem to get this is beyond me... President Obama has his chance to take a stand, the right stand, and I'm afraid his first big step forward will in fact be two steps backwards. And the country will suffer for it."
Bailout Talks Turn to More Equity Stakes
The evolving discussions reflect the difficulties facing the Obama administration as it endeavors to come up with a new look for the maligned financial bailout. It wants to create a comprehensive plan that appears different from the one crafted by the Bush Treasury, but is running into many of the same thorny questions encountered by former Treasury Secretary Henry Paulson, such as how to value the bad assets owned by banks.emphasis added; it's not the appearance of change that we can believe in -- obama promised an open, transparent and accountable gov't... i mean i feel like if 'we're the change' then we might as well start our own banks -- yay mefi credit union! -- and, perhaps not before too long, our own currencies :P
The administration has also been wrestling with how to help resolve the financial crisis while not appearing to bail out banks at the expense of taxpayers. The administration has been trying to find the balance by crafting programs that use taxpayer dollars but on terms that don't make it seem like a giveaway, including the executive-pay curbs announced this week. At the same time, in order to revive the financial system, the administration needs to create a program that encourages banks to participate.
That tension has been one of the complicating factors in creating a so-called bad bank to buy up toxic assets from financial institutions. To help banks the U.S. needs to pay a high enough price for the assets. But lawmakers are already angry about accusations that Treasury overpaid for assets and the Obama administration wants to avoid being seen as bailing out banks at the expense of taxpayers. If the government pay too little, banks would have to take further losses.
The discussions have shifted several times. As recently as last week, the apparent centerpiece of the revamped plan was a "bad bank" and an insurance program to protect losses on the remainder. Both ideas may still be included.
Fed and Treasury officials have said since announcing the TALF program in November that it could be expanded to include other asset classes. But the program is untested and hasn't yet been launched.
Finalizing the details of the plan have proved challenging. Under the program, investors, including many hedge funds, would get cheap, nonrecourse financing from the Fed which they would use to buy asset-backed securities tied to auto loans, credit card debt student loans and small business loans. Officials are still sorting through the terms they would offer.
A report issued by the Treasury Department's inspector general Thursday warned the TALF program was potentially vulnerable to private-sector fraud unless it included tough safeguards.
cheers!
posted by kliuless at 7:26 AM on February 6, 2009
kliuless: i'd point out that it's only an editorial interpretation on the part of the author of the commentary you cite that it's the obama team's intention only to create "the appearance of change."
point me to obama or any member of his team saying they're just trying to create the appearance of an improved plan, or even to a serious economist like krugman claiming he sees evidence of obama's intentionally only making superficial changes for appearances sake, or else i'm going to have to give obama the benefit of the doubt and assume his team actually is trying to craft a better plan, whether i agree that they're going about it the right way or not, despite what some hack writer for rupert murdoch's latest media acquisition has to say to the contrary.
posted by saulgoodman at 8:00 AM on February 6, 2009 [1 favorite]
point me to obama or any member of his team saying they're just trying to create the appearance of an improved plan, or even to a serious economist like krugman claiming he sees evidence of obama's intentionally only making superficial changes for appearances sake, or else i'm going to have to give obama the benefit of the doubt and assume his team actually is trying to craft a better plan, whether i agree that they're going about it the right way or not, despite what some hack writer for rupert murdoch's latest media acquisition has to say to the contrary.
posted by saulgoodman at 8:00 AM on February 6, 2009 [1 favorite]
right, these are all admittedly reporting on leaks that are being repeatedly run up the flagpole; in the final analysis they can only be judged by their actions (and results) -- i agree! krugman otoh... oh and i would also add that the baseline scenario economists (and martin wolf!) i think are worth considering, among others :P
cheers :D
posted by kliuless at 8:32 AM on February 6, 2009
cheers :D
posted by kliuless at 8:32 AM on February 6, 2009
kliuless: reading the commentary from the first krugman link you posted (the one to his blog) makes it seem pretty clear to me what the real problem is. there's really no sensible consensus about what to do from the most qualified economists to the lay-people, and everyone seems to have so many prior ideological commitments, there's no particular policy approach that appeals to even a plurality of people, so no matter what choices are made, lots of people are going to wail and gnash their teeth.
we elected obama to be responsive to the public will. he's been trying to do that. when he takes more initiative, he gets branded as a leftist dictator in the making; when he tries to be more inclusive, he gets accused of showing weak leadership.
the problem in the US is the same problem brazil, venezuela and so many other countries around the world have and have had in recent years: the entrenched economic and political powers have already got far more practical power than the government does. if they don't like a particular administration and want to see them ruined, they can cause havok by becoming excessively bearish and throwing up roadblocks to the administration's policies through non-policy mechanisms (back room deals, excessively critical press coverage). when one of their guys isn't in office, suddenly the economy gets worse, and conflicts around the world (all armed and funded by the same interests, coincidentally) flare up.
it's like how in venezuela, the big food producers all consciously conspired to make it impossible to get food to market, and then made a big media circus about blaming the shortages on chavez' mismanagement of the economy (not that i'm saying chavez is blameless; i just find it repugnantly dishonest to attribute calculated decisions to let food rot in the fields or in store houses to "market forces.") capital is trying to hold our economy and our political processes hostage, and as of right now, after increasing their leverage for decades under reagan-era "reforms," they really do hold all the good cards.
posted by saulgoodman at 9:26 AM on February 6, 2009 [3 favorites]
we elected obama to be responsive to the public will. he's been trying to do that. when he takes more initiative, he gets branded as a leftist dictator in the making; when he tries to be more inclusive, he gets accused of showing weak leadership.
the problem in the US is the same problem brazil, venezuela and so many other countries around the world have and have had in recent years: the entrenched economic and political powers have already got far more practical power than the government does. if they don't like a particular administration and want to see them ruined, they can cause havok by becoming excessively bearish and throwing up roadblocks to the administration's policies through non-policy mechanisms (back room deals, excessively critical press coverage). when one of their guys isn't in office, suddenly the economy gets worse, and conflicts around the world (all armed and funded by the same interests, coincidentally) flare up.
it's like how in venezuela, the big food producers all consciously conspired to make it impossible to get food to market, and then made a big media circus about blaming the shortages on chavez' mismanagement of the economy (not that i'm saying chavez is blameless; i just find it repugnantly dishonest to attribute calculated decisions to let food rot in the fields or in store houses to "market forces.") capital is trying to hold our economy and our political processes hostage, and as of right now, after increasing their leverage for decades under reagan-era "reforms," they really do hold all the good cards.
posted by saulgoodman at 9:26 AM on February 6, 2009 [3 favorites]
"reading the commentary"-->"reading the comments"
posted by saulgoodman at 10:00 AM on February 6, 2009
posted by saulgoodman at 10:00 AM on February 6, 2009
i'm not looking for consensus; i'm looking for openness, transparency and accountability and i'm not seeing it (with the notable exception of warren ;)... altho i'm holding out hope for obama's shiny new economic recovery advisory board headed up by (the previously? snubbed and marginalised) volcker, who'll hopefully provide some counterweight to summers' (and geithner's) tendency to roll over for wall street.
again, i totally agree with what you're talking about -- political capitalism (or regulatory capture) is exactly what needs to be stopped! and if the newbailout rescue package turns out to be another taxpayer giveaway without any accountability i'd take that as clear evidence of obama's early capture by (at least one) special interest.
also see...
martin wolf!
and btw a couple from CR :P
posted by kliuless at 10:49 AM on February 6, 2009
again, i totally agree with what you're talking about -- political capitalism (or regulatory capture) is exactly what needs to be stopped! and if the new
also see...
martin wolf!
and btw a couple from CR :P
- White House Plans Smaller Bank Bailout: "If the government buys assets below the banks carrying value, then the banks will have to take additional write-downs and will need more capital. With this plan the taxpayers are still taking all the risk, and the shareholders of the banks receive the rewards. That still doesn't make sense."
- Bailout: More Equity Stakes? "It is pretty amazing how the plan keeps shifting. I think they realize the bad bank is unworkable, but they can't take the next step and preprivatize the insolvent banks."
posted by kliuless at 10:49 AM on February 6, 2009
i guess i'm still optimistic--or at least hopeful--that the rumors about capitulations to special interests will turn out to have been distortions of fact or premature judgments. i've noticed there's been a particular tendency lately for parties on all sides to rush to judgment going on second-hand information gleaned through informal or unofficial channels--if not pure speculation--before official policy has actually been set.
it's understandable that everyone wants to see this done right, and that the past hasn't given us much cause for optimism, but can't we at least wait and see what the financial rescue proposals in their final form look like before assuming the worst? that said, i'm all for open (but level-headed) discussions about what options should be on the table and what the likely outcomes might be.
personally, i think it's time to nationalize--at least temporarily--the banks that are most likely insolvent. criticism from wall street and the right be damned. and i've written to the obama administration to say so (as should others who feel this way). some ideas like this--and like taking steps to close the trade gap with china and gently putting the brakes for the short term on the rush to globalization--have become political third rails that big business and the media absolutely will not allow to have a fair hearing, despite their obvious populist appeal and the potential domestic economic benefits. and why aren't we talking about instituting big tax penalties on profitable companies that make unnecessary layoffs in order to offset the increased government services and benefits we'll need to make up the employment gap?
maybe it's time to just take a hard-line and reassert the federal government's sovereignty as the US's sole legitimate legal authority, regardless of the pressures from business interests and the international community.
posted by saulgoodman at 11:33 AM on February 6, 2009 [1 favorite]
it's understandable that everyone wants to see this done right, and that the past hasn't given us much cause for optimism, but can't we at least wait and see what the financial rescue proposals in their final form look like before assuming the worst? that said, i'm all for open (but level-headed) discussions about what options should be on the table and what the likely outcomes might be.
personally, i think it's time to nationalize--at least temporarily--the banks that are most likely insolvent. criticism from wall street and the right be damned. and i've written to the obama administration to say so (as should others who feel this way). some ideas like this--and like taking steps to close the trade gap with china and gently putting the brakes for the short term on the rush to globalization--have become political third rails that big business and the media absolutely will not allow to have a fair hearing, despite their obvious populist appeal and the potential domestic economic benefits. and why aren't we talking about instituting big tax penalties on profitable companies that make unnecessary layoffs in order to offset the increased government services and benefits we'll need to make up the employment gap?
maybe it's time to just take a hard-line and reassert the federal government's sovereignty as the US's sole legitimate legal authority, regardless of the pressures from business interests and the international community.
posted by saulgoodman at 11:33 AM on February 6, 2009 [1 favorite]
The problem with this is that the existing system is a Ponzi scheme.
The reliance on constant bailouts, the avoidance of accurate valuation of assets, and the assumption that constant year-on-year growth is possible, might drift into Ponzi territory, but the financial system itself is not inherently a Ponzi scheme.
The problem is not that the system is inherently flawed—it's not. The problem is that nobody's policing it and punishing the cheaters.
That said, nationalize the failed banks and claw back the bonuses that were the result not of real production, but of creative cheating.
posted by oaf at 6:11 AM on February 7, 2009 [1 favorite]
The reliance on constant bailouts, the avoidance of accurate valuation of assets, and the assumption that constant year-on-year growth is possible, might drift into Ponzi territory, but the financial system itself is not inherently a Ponzi scheme.
The problem is not that the system is inherently flawed—it's not. The problem is that nobody's policing it and punishing the cheaters.
That said, nationalize the failed banks and claw back the bonuses that were the result not of real production, but of creative cheating.
posted by oaf at 6:11 AM on February 7, 2009 [1 favorite]
- And Now We Know
- Waiting For Geithner
- YOU, the U.S. Taxpayer, Can't Handle the Truth
posted by kliuless at 10:25 AM on February 8, 2009
- Waiting For Geithner
- YOU, the U.S. Taxpayer, Can't Handle the Truth
posted by kliuless at 10:25 AM on February 8, 2009
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posted by empath at 11:40 AM on February 5, 2009 [3 favorites]