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View Diary: The politics of Matt Taibbi's big con (105 comments)

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  •  taibbi wrote a huge expose with extensive evidence (9+ / 0-)

    on how the government colludes with the bankers.  he decribes in detail the mechanisms and the threat, both to our economy and our democracy.

    he gives facts which you have not disproved or challenged.

    this article is one of a series taibbi has written on the subject of how the financial oligarchy has taken power and replaced democratic (small d) government in the united states.

    its an astounding read.  i encourage everyone to read the entire series of taibbi blogs over the last year or so.

    what he describes goes way beyond Democrat vs Republican, it goes right to the heart of who rules America.

    •  I don't get how you can write such stuff (2+ / 0-)
      Recommended by:
      emelyn, shrike

      Taibbi presents the SBLF as a scam that allows Wall Street bankers to pay back TARP money with cheaper money. On inspection, that turns out to be a gross lie. In fact the SBLF has funded small banks to make small business loans and even has funded non-profit finance groups who assist the poor. So his story is a lie. And yet you persist in believing him to be presenting the gospel truth. Why is that?

      favorite band: twisted gloating

      by citizen k on Mon Jan 07, 2013 at 11:31:36 AM PST

      [ Parent ]

      •  where is the lie in what he wrote? (6+ / 0-)

        And please be specific, what statement in this is a lie?

        From Taibbi article re: SBLF...

        Other banks found more creative uses for bailout money. In October 2010, Obama signed a new bailout bill creating a program called the Small Business Lending Fund, in which firms with fewer than $10 billion in assets could apply to share in a pool of $4 billion in public money.

        As it turned out, however, about a third of the 332 companies that took part in the program used at least some of the money to repay their original TARP loans.

        Small banks that still owed TARP money essentially took out cheaper loans from the government to repay their more expensive TARP loans – a move that conveniently exempted them from the limits on executive bonuses mandated by the bailout.

        All told, studies show, $2.2 billion of the $4 billion ended up being spent not on small-business loans, but on TARP repayment.

         "It's a bit of a shell game," admitted John Schmidt, chief operating officer of Iowa-based Heartland Financial, which took $81.7 million from the SBLF and used every penny of it to repay TARP.

        •  here's the lie (2+ / 0-)
          Recommended by:
          dmd76, elmo
          Small banks that still owed TARP money essentially took out cheaper loans from the government to repay their more expensive TARP loans – a move that conveniently exempted them from the limits on executive bonuses mandated by the bailout.
          This is like saying "people who take food stamps use the money to finance their drug gangs".

          Not only was the SBLF money NOT cheaper for banks that do not increase small business loans, but it has been used by all sorts of excellent organizations for great purposes.

          The bigger lie is that this is Taibbi's main example of how, supposedly, banks used other Federal money to pay back TARP.

          I'm embarrassed for the people whose need to embrace Taibbi's factesque crap outweighs any interest in truth.

          favorite band: twisted gloating

          by citizen k on Mon Jan 07, 2013 at 12:29:44 PM PST

          [ Parent ]

          •  Did you seriously just argue that more than half (6+ / 0-)

            of all food stamps "dollars" are used to buy drugs?

            All told, studies show, $2.2 billion of the $4 billion ended up being spent not on small-business loans, but on TARP repayment.
            This isn't some minor fraud around the edges.  This is more than half the damned money.

            If you can refute this claim, you should.

            If you can't, you've got nothing.

            "Furthermore, if you think this would be the very very last cut ever if we let it happen, you are a very confused little rabbit." cai

            by JesseCW on Mon Jan 07, 2013 at 12:52:44 PM PST

            [ Parent ]

            •  Your understanding of banking is up to BobSwern's (0+ / 0-)

              level.

              The goal of the program is to increase credit availability to small business and to boost small community banks and agencies. This goal is not incompatible with paying off TARP loans, in fact that's a reasonable action.  Because, as noted above and easily verified the interest rate only goes down if the rate of small business lending increases.

                 For community banks, the SBLF is structured to encourage small business lending through a dividend or interest rate incentive structure. The initial rate payable on SBLF capital is, at most, five percent,3 and the rate falls to one percent if a bank’s small business lending increases by ten percent or more. Banks that increase their lending by less than ten percent pay rates between two percent and four percent. If a bank’s lending does not increase in the first two years, however, the rate increases to seven percent, and after 4.5 years total, the rate for all banks increases to nine percent (if the bank has not already repaid the SBLF funding).
                  For CDLFs, the SBLF is structured to encourage small business lending through access to low-cost capital. These non-profit loan funds play a critical role in distressed communities across the country that lack access to mainstream financial services. CDLFs engage in activities ranging from offering microloans to entrepreneurs, providing mezzanine debt to growing small businesses, and financing community facilities like charter schools and health clinics.
              I understand why Republicans hate this program.

              favorite band: twisted gloating

              by citizen k on Mon Jan 07, 2013 at 01:06:47 PM PST

              [ Parent ]

          •  au contraire (3+ / 0-)
            Recommended by:
            Joieau, melfunction, Aspe4

            TheStreet.com reports differently than you... they confirm Taibbi.

            Small Business Loans Getting TARP Jolt

            NEW YORK (TheStreet) -- If you are a bank and still haven't repaid government bailout money, Uncle Sam has a deal for you.

            (snip... recommend you read the article yourself... very interesting take from a business POV on using SBLF to pay off TARP with examples of banks doing it...)

            SNL Financial in May identified 53 banks that said they were applying for SBLF, also commented at that time that "applying banks [continued] to indicate that the fund will mostly be used as a mechanism to refinance TARP."

            The Street says
            •  Right, because TheStreet really approves (0+ / 0-)

              of micro-lending to poor people or of small community banks.  And it's terrible that small community banks should pay lower rates than giant commercial banks if they boost small business loans.

              Brilliant.

              favorite band: twisted gloating

              by citizen k on Mon Jan 07, 2013 at 01:02:04 PM PST

              [ Parent ]

              •  Your desperation to conclude that Taibbi was not (0+ / 0-)

                conning you is sad.

                favorite band: twisted gloating

                by citizen k on Mon Jan 07, 2013 at 01:15:50 PM PST

                [ Parent ]

              •  i dont think you understood my point... (2+ / 0-)
                Recommended by:
                melfunction, Aspe4

                which is that banks are using the program to pay off tarp loans, and that is a big driver for participation by many of them, just as taibbi said and as documented by the street article as well as a zillion other business media, wsj, etc. if you care to google it go ahead.

                i dont think any of these take a position on microlending or anything else unless it can turn them a profit on a stock trade or investment, and so?.. does that mean they are lying?

                •  you are evading the core point (1+ / 0-)
                  Recommended by:
                  dmd76

                  Taibbi's argument is that SBLF was a scam to allow banks to avoid even the limited obligations of TARP. He specifically ties it to the failure of the bailout to produce more lending. But SBLF is an apparently successful program that has nothing to do with Wall Street, but helps community banks and community lenders. The program has boosted lending by a majority of its recipients and has clearly funded some excellent projects. I think that even if some of the SBLF money was wasted, getting funding to organizations like the Appalachian group or the micro-lending firm or to small community banks that have boosted small business lending was not only a good thing, but evidence of the difference between the GOP and the Democratic responses to the financial crisis.  It's irrelevant whether some banks used the money to pay TARP loans back - 60% increased their small business lending. And  certainly nobody who knows of this program only from Taibbi will have that impression - instead they will think that its just another ripoff from a corrupt government.

                  Many people who read Taibbi's article - as you can see in the discussion of the previous diary - got the impression that the repayments of TARP were from money provided by other government programs. And this SBLF is the lynchpin of Taibbi's argument for that point. He puts it out there and then writes:

                  Using small-business funds to pay down their own debts, parking huge amounts of cash at the Fed in the midst of a stalled economy – it's all just evidence of what most Americans know instinctively: that the bailouts didn't result in much new business lending

                  If anything, the bailouts actually hindered lending, as banks became more like house pets that grow fat and lazy on two guaranteed meals a day than wild animals that have to go out into the jungle and hunt for opportunities in order to eat.

                  But actually, the SBLF HAS increased small business lending and it did not go to wall street at all.

                  favorite band: twisted gloating

                  by citizen k on Mon Jan 07, 2013 at 04:13:42 PM PST

                  [ Parent ]

                  •  It's even better (0+ / 0-)

                    From the most recent SBLF Use of Funds Report (released today):

                    • In total, SBLF participants have increased their small business lending by over $7.4 billion over a $36.5 billion baseline, and by $740 million over the prior quarter.
                    • Increases in small business lending are widespread across SBLF participants, with 89 percent of participants having increased their small business lending over baseline levels.
                    • Over three-quarters of SBLF participants (78 percent) have increased their small business lending by 10 percent or more.
                    Also,
                    • SBLF banks that refinanced CPP funding have increased business lending by a median of 17.2 percent since their initial receipt of CPP funding from Treasury versus a 14.0 percent increase for the peer group and a 6.6 percent increase for the comparison group over the same period.
                    source
                    •  Forgot to include this (0+ / 0-)
                      • SBLF banks have increased business loans outstanding by a median of 32.2 percent over baseline levels, versus a 5.7 percent median increase for the representative peer group and a 2.1 percent median increase for the broader comparison group.
                      Same source. The representative peer group and broader comparison group are defined in the document.
            •  asdf (0+ / 0-)

              I'll reiterate my comment from above:

              If all a bank does is pay back it's TARP loan with money from an SBLF loan, it will be have to pay back the SBLF loan at exactly the same interest rate as the original TARP loan, and if they don't pay back this new SBLF loan within 2 years, their interest rate goes up quicker and higher than it would have under the TARP loan. The SBLF loans only become "cheaper" than the TARP loan when the bank increases the amount of lending it does to small businesses. This is a program that provides an incentive for community banks to lend to small businesses that was not present in TARP. By paying back a TARP loan with an SBLF loan, a bank is committing itself to increasing the amount of small business lending it does (provided it isn't run by morons). This is not a bad thing.

              sources: 1 2

              •  nope (1+ / 0-)
                Recommended by:
                melfunction

                the way it works is that the bank will pay 5% down to 1% depending on % increase of loans between what was the average from june 2009 to june 2010 and from when they take the government money.  

                for 2.5 years the price of sblf money is guarranteed not to go above tarp, i.e. 5% and can go down as far as 1% if they loan 10% more than what they did in 2009.

                after that the cost could go higher if they dont make loans, but they can also return the sblf money with no prepayment penalty.

                and with the sblf money they have no restrictions on executive bonuses that come with tarp.

                •  In other words, (1+ / 0-)
                  Recommended by:
                  citizen k

                  exactly what I said. SBLF loans incentivized increased lending to small businesses by decreasing the dividend rate to be paid as banks increased lending to small business (a rate which is calculated quarterly and not just "when they take the government money").
                  In addition,

                  Institutions that are refinancing CPP investments must
                  increase their small business lending to receive an economic benefit from refinancing. If at the beginning of the tenth full calendar quarter after the date on which a bank receives SBLF funding, the bank’s Qualified Small Business Lending as reported in the ninth quarter has not increased relative to its baseline amount, then the bank will be required to pay, at the beginning of the fifth anniversary of the CPP investment, a repayment incentive fee equal to 2% per year on the total amount of outstanding SBLF funding
                  source

                  This incentive to increase loans to small businesses was not in TARP. What exactly are you saying "nope" to?

                  •  apparently some people have an ideological (1+ / 0-)
                    Recommended by:
                    dmd76

                    requirement to conclude that (a) Taibbi is always right and (b) the Democrats are corrupt Wall Street captives. Evidence to the contrary is dismissed.

                    favorite band: twisted gloating

                    by citizen k on Mon Jan 07, 2013 at 04:36:26 PM PST

                    [ Parent ]

                  •  yeah oh boy.. increased as compared to 2009 (0+ / 0-)

                    and the money is basically free if they do just 10% better than a rock bottom comparison, and oh yeah... the executive bonus...

                    and this is the best you got to dispute taibbi?

                    •  SBLF (0+ / 0-)

                      was created as part of the Small Business Jobs Act of 2010, signed into law in September, 2010. The deadline for applying for an SBLF loan was originally March 31, 2011, and was later extended until May 16, 2011. The established baseline was the quarterly average of loans made to small businesses in the four quarters ending on June 30, 2010. Given those parameters, what do you think would have been a fair baseline? Would a baseline period ending on December 31, 2010 have made the program worthwhile in your eyes?  

                      As for the executive bonuses, are you seriously claiming that a significant portion of the SBLF funds were used to pay bonuses? That banks chose to refinance their TARP loans just so that they could pay their executives higher bonuses? What figures do you have to back your innuendo? Were the bonuses paid at banks that took SBLF funds higher than at comparable banks who didn't?

                      If you want to see how well SBLF has worked, here's the latest Use of Funds Report, released today.  

          •  Yo. Please provide (1+ / 0-)
            Recommended by:
            melfunction

            the evidence that "about a third" of companies who took part in the program didn't use the money to make TARP payments, and/or that 2.2 billion of the program's 4 billion budget didn't get cycled to TARP.

            Thanks.

    •  Exactly right. (3+ / 0-)
      Recommended by:
      melfunction, TracieLynn, Aspe4

      Neil Barofsky's book, Bailout, is in accord.  I am a third of the way into Sheila Bair's "Bull By The Horns," and it is the same. Yves Smith and Bill Black have been writing about these issues at New Economic Perspectives and Naked Capitalism. Also Gretchen Morgensen at NYT. All tell pieces of a coherent story, and Taibbi's incredible reporting is of a piece with them.

      This diary is pure flame bait and I am not going to get into the merits with the diarist.

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