How the big US banks make the big bucks in the current crisis

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Haven't we all wondered why it is that the big banks on Wall street report record profits and pay out record bonuses while America is facing a severe economic crisis, with unemployment rising? Well, it has to do with how the US, started with Bush and then continued by Obama, tried to fix the crisis.

Here is a very concise explanation (sadly I can't embed because it is on vimeo).

And indeed, everyone's happy, except for the poor sap left paying the bill - the US taxpayer, who, as Paddy Hirsch likes to say at the end, is eventually really in bad need of a drink.

 

Excellent video, although I'm sure I am coming away with a different outcome than you are

I don't see anything wrong with what the banks are doing.

What I see wrong is the ineptitude of the Obama administration for continuing this cycle of stupidity. This is what the Tea Party and conservative movement are all about. The government needs to stop borrowing and spending at a pace never seen before in history. At some point it becomes unsustainable. The situation will get even worse if Congress ignores the people and passes this abomination of a health care bill.

 

Well, what they do is certainly good business from their point of view and it is legal as well.

The interesting question is whether it is healthy and desirable that they feast on taxpayer money in such a way. I presume most people frown upon those legendary 'welfare queens' (at least reportedly) profiting from (zero interest) government handouts. But that's pennies compared to sums that exceed the GDP of mid sized countries.

As for the criticism of the tea partiers level at the bailout and the (mantra-like) accusation of government ineptitude - a simple question:

Was there an alternative?

If so, which one? While flawed in execution (there definitely should have been strings attached, like for example a bonus tax, a speculation tax, or interest on the monies) the measures themselves appear to be largely sound.

As for the accusations against Obama, let's just keep in mind that Obama is in this respect merely continuing the inevitable steps that Bush had to make when the **** started hitting the fan in the last months of his presidency. The R's attacking him now for reckless spending for years merrily rubber stamped a defence budget dwarfing the bailout and were mostly for the bailout (and voted for Bush's bailout package) before it became expedient to be against it once Obama became president. I take their lamentations with a bag of salt.

For those willing to let the free market self correct: Sure the market would have self regulated through collapse, in the very way metastasising cancer does self regulate through death. Meaning: You not really would have wanted these banks to fail.

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To clarify: 'feast on taxpayer money in such a way' is to be understood in the following way:

The idea of the bailout was and is to prevent substantial harm from the US economy, and to the American people. The substantial harm would be unemployment, mass bankruptcies as people out of jobs (or people with jobs facing massively increased interest rates) can no longer pay off their mortgages and their bills - in brief another Great Depression. In that sense, giving to the banks preventing a Great Repression from happening benefits Bob and Joe, or 'Main Street', something the tea partiers can't seemingly grasp.

But that doesn't mean, even though it is necessary to bail out the banks, that they are to profit from these necessary measures. After all it was their greed and recklessness that caused the mess in the first place. Allowing them to profit from the bailout, at taxpayer's expense, reinforces harmful behaviour. There is a reason why one slaps a puppy with a rolled paper when it pees on the carpet instead of rewarding it.

And harmful it was, as we are to see the first crisis related cases of fraud go to trial in the coming months, starting with Lehmann Brothers and their Repo 105 scheme.

 

I have not seen any evidence of that Snook. I think you raise a valid point, but the "conservative" track record on spending is not very good either, espeically over the previous 8 years and even going back to the "golden years" of Ronald Reagan, who commented that "the deficit was big enough to take care of itself."

http://www.brainyquote.com/quotes/quotes/r/ronaldreag130243.html

CBO has stated that the health care bill will save money on the Federal deficit:

http://firstread.msnbc.msn.com/archive/2010/03/18/2231793.aspx

 

Your doing the same thing that I always call Ragusa out for. Trying to justify Obama's record runaway deficit spending by claiming somebody else did it (although at a much smaller scale) doesn't change the fact that it is dangerous and could very well bankrupt the country.

As to the CBO, you have got to be kidding. Do you recall Pelosi's famous recent quote of "We have to pass the bill to find out what is in it?" The CBO being able to forecast this out is almost as ludicrous as climatologists being able to forecast the weather out 100 years. Have you ever heard of a government program actually saving money, or even coming close to being what was projected. I live in MA, you only have to look at two recent government programs (the big dig, and the MA universal health care bill) to know the "truth" vs. the "lie". Some Dem leaders are starting to question if we can afford it as we are finding out the system is only being kept afloat with federal money. Everybody knows we recently elected a Republican Senator for the first time in known history. Even the voters aren't being fooled anymore.

As to the cost, all you have to do is listen to the talking points that Obama and company keep spouting. They really go out of the way to mention this "cost savings". The talking points they stress are "historic" "coverage", "compassion", etc. They do everything they can to avoid talking about the impact it will have on the economy.

 

Snook,
as for calling me out, just so you do it for the right thing: I don't defend Obama. I merely attack the Republicans because I think that people who sit in glass houses ought not throw stones. I have a long attention span. Their current rabble rousing is disgusting, and their attacks against Obama over spending are dishonest, in particular in light of what they did before. One doesn't need to be an Obama supporter to object to that.

I think the R's currently so very vocal concern about big deficits and fiscal responsibility is at the very least something they chose to not overly concern themselves with between 2001 and 2009. After Bush had eventually spent the surplus he inherited and went into debt, it was during the Bush years very popular among the R's to assert that deficits are great because after all they worked so splendidly under Reagan, and dutifully the party fell in line. Republicans and rabid tea baggers have this peculiar amnesia about the origins of the budget situation Obama inherited. To them, disingenuously, it is all Obama's fault. That's ridiculous, but not funny.

As the Economist commented on the egregious John Boehner saying:

What I predict is that Obama's measures will provide relief for the economy, but that that may not be notable until after the mid-term elections, in which the US electorate will probably lash out, likely resulting in lost seats for Democrats, and then the R's will take credit for the economic upturn. There is no shame, and politics isn't fair, I know, but that doesn't make the current Republican lamentations any more honest.

I'll take Republicans serious again when I see them call for cuts in the the biggest budget item - the Pentagon budget (after all, are they not for small government and think that America has to live within its means, no?). Of course, this isn't going to happen any time soon because anything 'defence' is a Republican holy cow.

 

The Republicans did something sneaky here in that they did not include overseas military operations in the actual defense budget; it is in a separate category, so that when someone looks at the actual defense budget is about a trillion dollars smaller than it really is. That trillion dollars is unfunded and mostly pure debt, btw.

 

I think you used the wrong operator, Chandos. Overseas defense spending was a separate category and was unfunded and mostly pure debt. Under Obama overseas spending is now counted as part of our total defense spending.

 

Thank you for the update, Drew. I had heard that Obama would change it, but I hadn't heard that it had been switched.

 

But what you do is useless. You (and many others) need to put Bush and your neocon paranoia in the past and focus on the present and the future. Spending so much time and effort pointing out that someone else did something is a backhanded way to show support for someone else doing the exact same thing. I'm assuming your mother taught you "Two wrongs don't make a right". If what the previous administration did was wrong, the current administration doing it even more should be even more wrong.

No matter how you look at it, Obama (in such a short amount of time)has spent more then any president before him with no end in sight.

 

Take a look at the real picture. What does it tell you about conservative presidents compared to "liberal" Dems? (Hint: the red lines).

http://zfacts.com/p/318.html

I was speaking of the track record for the modern conservative movement until the present, Snook.

Maybe this time it's really different. Who can say?

 

You can only be justly accused for doing the wrong thing if you have a choice, calling into question if it is indeed the wrong thing if you don't. With the deficit and the economic crisis he inherited, Obama arguably doesn't have a choice.

Also, the 'Obama does sin now' line of argument is a pretty convenient excuse for glossing over past Republican involvement in generating the deficit Obama is now forced to increase. But never mind, that's all aaaanciiiiieeent history, let's just move on quickly!? The Republicans who are today falling over themselves denouncing Obama's spending while piously proposing to move on simply refuse to take responsibility for their own past actions.

It isn't as if the deficit came over night once Obama took office. It was the Republican majority under Bush that voted for Bush's budgets and that voted for Bush's deficit. Republicans really ought to remind themselves of their contribution i.e. of their voting records before accusing Obama - a constructive approach to politics would suggest as much, not that we see anything like that.

There is this very apt biblical allegory in Matthew 7:3: Why do you notice the splinter in your brother's eye, but do not perceive the wooden beam in your own eye? (Which is of course totally off topic: After all the Bible is to be understood literally, and as Republicans don't have a beam in their eye, and Democrats don't have splinters in theirs, the passage has no relevance here.)

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As for my 'neo-conservative paranoia' as you prefer to put it - that has nothing to do with Bush's spending and economic policies. That's a thing about foreign policy mostly, and only concerns domestic policy to the extent that it involves the alliance between Christian Zionists (i.e a segment of Bush's Christian right coalition) and the neo-conservatives for political expediency. Neo-conservatives transcend party lines, and I see their line of thought continuing quite clearly in the Obama administration, namely in the person of pro-Israel hawk Dennis Ross.

 

All I can say, is "I tried"

 

Same here.