This won't be a long piece but I've had it up to ......... with this "we need to save the banks" BS, first from the Bush Administration, now coming from the mouth of Timothy Geithner,Obama's pick and Secretary of the Treasury. It seems to look exactly like what occurred with Henry Paulson's taxpayer give away. What really gets me is nobody is looking at what these financial geniuses are pushing on us. A path back to the same business that brought us to this low.
More after the fold with poll
Cross posted from idealthoughts
How many times have you heard "we have to get the credit markets working again to get out of this recession? Banks right now are refusing loans because of the current economic mess, while they raise interest rates on the very same people who are losing their jobs and homes, but are being compelled to finance the continued idiocy shown over the years. These are the so called industry "bright boys" who "knew how to make money" but in their greed and gluttony along with their crooked dealings sent us here where we are today. Over three million jobs lost, many losing their homes because of predatory lending, then there those who have worked to retire, only to lose everything with the collapse of the market and are SOL, and having to forgo retirement. But we need to protect them according to those in Congress and the White House. No we don't.
Let us look at this financial meltdown and ask, "if Wall Street and the Bankers conduct was so shameful, why are they not being investigated?" When you bundle and repackage stacks of loans, then sell them to investors that are too stupid to look at what they are buying, who then combine two bundles to make them look healthier and more valuable, then sell them at a profit, isn't that deceit? When you base a financial appraisal of wealth and value on your control of a bunch of these loan bundles, yet you truly do not know their actual value, hence your actual value, is that not fraud?
Notice the phrase so often use; "credit market". The credit market is allowing banks to package loans in the very same fashion they once did and mix all sorts of whatever then try to market them, and create leverage capitol, and we are back where we started. Yes we have been promised regulation and oversight, but what about all these financial geniuses who can't have their pay limited because of real crappy performance, otherwise they might refuse our gift to them? They are reluctant to agree to any restrictions, yada yada yada. You and I however have to lump the financial consequences.
Why? Why are we accepting this and the same CEO's who brought this about are left with no real interruption of their life styles, or employment?
Then to make matters worse, Giethner now is allowing a back door rule change that will facilitate exactly the same behavior again as noted in the Huffington Post:
Mark-to-market accounting requires banks to value assets at current market
prices. When assets are illiquid - unable to be sold - it's difficult to value
them with clarity. Reducing those assets' values on banks' books has led to deep
write-downs over the past year. The banks argue that the problem lies with the
frozen market, not with the actual asset and that they shouldn't be penalized
with a write-down. Abolishing mark-to-market would improve the outlook of a
bank's balance sheet without changing any of the underlying fundamentals. In
other words, the bank would physically have no more or no fewer assets but would
value itself at a higher dollar amount.
Abolishing mark-to-market was a top
priority for House Republicans during the fall bailout debate and remains a key
issue for the GOP.
Basically what the banks are saying is the rules don't apply to them, and taxpayers should fund endlessly without any idea of cost, their failed attempt to manipulate and inflate the market. The only thing that everyone seems to have missed is though you and the bank bought a piece of property each for $400,000, and because of the market's fall that property is only worth $200,000 today, you get to eat that loss and continue to pay the original price, while banks are allowed not to suffer any loss due to market correction and change, and to top it off you now are paying for the inflated original price of that banks bad investment as well.
William Black, a senior banking regulator during the savings and loan collapse had this observation:
Black thinks the federal guarantees are a mistake. "By keeping bad
management in place, hiding losses, and bailing out risk capital (the
shareholders and subordinated debt holders that are supposed to receive nothing
if the bank becomes insolvent) we cause hundreds of billions of dollars of
unnecessary expenses to the taxpayers, maintain and intensify the perverse
incentives on asset management/disposal, and create perverse incentives likely
to produce future crises by maximizing moral hazard," he said in an
e-mail.
So again we go back to my opening. Why are we as taxpayers obligated to pay the banks bad debt, caused by reckless bargaining, deception through sleight of hand, and of course help insure that those with the capitol who could invest in hedge funds have their risk/losses mitigated? Those that are planning this fail to see several facts and are in fact themselves trying to return us to a point of just before the collapse happened, thereby guaranteeing another imminent collapse again.
Case in point. Part of the real estate market's fall was due to unrealistic inflation of property value to equal to the rise in cost of living, or income. To guarantee an inflated price and return on property owned by a bank that was overvalued while allowing privately owned property's to correct and spiral down does not facilitate the ability of the consumer to begin to start purchasing again. You have set up a disparate level of values between two identical properties next door to one another where one, owned by the bank will get a higher return if sold then the other which is individually owned. Both the bank and property owner paid an inflated price, but only the bank get's it's money back at the expense of the property owner next door. The property owner is left paying an inflated mortgage, the bank under no obligation to help the individual insure his property value liquidates the property and recoups it's loss, subsidized by you know who. For the mortgage payer with the bank's liquidation, their property value might possibly decline further to even below original market value, depending the price the bank sold it's insured property for.
Joseph Stiglitz, Nobel Prize winning Economist noted this concerning the need to supposedly rescue the banks:
"Banks have failed over and over again in the history of America, in the history
of capitalism, and it's unfortunately an all-too-frequent event," Stiglitz
noted, arguing that bankruptcy is the economically prudent path for such firms.
"It has to be managed well... we have in some examples under the previous
administration, the way the Lehman Bros was handled was an example of it being
done badly. But, for instance, to mention some recent examples, Washington
Mutual went into bankruptcy, a number of banks went into bankruptcy... and
obviously some people lost some money, but it didn't lead to a fundamental
systemic problem."
So here we go again. The people putting together these financial recovery plans are basically the same folks that got us into this mess, that alone gives me pause as to the success of this "rescue". They didn't get all our money the first time around so they will damn sure get it this time around, especially with no estimated ceiling or time frame. Fraud and deception played a big part in this, along with lax to no oversight or regulation, and Mr Geithner now via a back door wants to make this current market easier to continue the practices of the past, that were not even allowed earlier under Bush. No Mas! Let some banks fail; let their executives be out of a job. Investigate for criminal wrong doing. In the mean time we will rebuild a better system. For those trying to further this baloney fix it plan I say be careful, because I like others are getting ready to pass out pitchforks and torches to the villagers.