Kossack
CA Berkeley WV tells us, earlier this evening in, "
Capitol Hill News Open Thread: I Got Nothing," that:
"Simon Johnson is worth the read."
Yes, worth the read, indeed. (See farther down, below.)
IMHO, "They Saved the Big Banks But Kind Of Lost The Economy Doing It," very well may be the most powerful thing Johnson's written since "The Quiet Coup" appeared in The Atlantic, a little less than a year ago. He sets the record straight and righteously rips Tim Geithner a new one, based upon a piece by John Cassidy on the Treasury Secretary which appeared, today, in the March 15th edition of the New Yorker, entitled, "No Credit."
# # #
THE MEME: "We saved the economy, but we kind of lost the public doing it."
In "No Credit," we are told--by Geithner, himself--that Geithner and Company "...saved the economy, but we kind of lost the public doing it." Cassidy conveniently glosses over many not-so-small details, however, which Johnson addresses in his commentary. (I'll get to that in a few moments, down below. But, the bottom line here is this is, quite simply, a political clusterf*ck for the Democratic Party this year, anyway you look at it. And, again, as Johnson reminds us: "Tim Geithner is not a Democrat.")
Cassidy's piece tells us:
"Geithner's stabilization plan has proved more effective than many observers expected, this one included."
--SNIP--
"...there is good news about the financial system and the roundly loathed bank bailout, the seven-hundred-billion-dollar relief package that Congress approved in October, 2008. During the past ten months, U.S. banks have raised more than a hundred and forty billion dollars from investors and increased the reserves they hold to cover unforeseen losses. While many small banks are still in peril, their larger brethren, such as Bank of America, Wells Fargo, and Goldman Sachs, are more strongly capitalized than many of their international competitors, and they have repaid virtually all the money they received from taxpayers. Looking ahead, the Treasury Department estimates the ultimate cost of the financial-rescue package at just a hundred and seventeen billion dollars--and much of that related to propping up General Motors and Chrysler. Barring something unexpected, the bailout will end up costing taxpayers less than the savings-and-loan implosion of the early nineteen-nineties. The government could conceivably end up making money."
And, of course, this is all reinforced by the meme that "Obama and the stimulus have helped our investments"--which may resonate among the upscale audience that frequents this online community--but it pretty much falls upon deaf ears, at least as far as our Party's base is concerned, once it's acknowledged that less than half of the working population even has a 401(k).
# # #
THE HARSH REALITIES
As long as one IGNORES a myriad of current-day facts--the most basic of which being that Main Street is reeling and things are not projected to significantly improve over the next couple of years, at best--this myopic and/or revisionist history seems valid. As a political meme for Democrats, however, it simply doesn't work. Here's Simon Johnson's blogging bud, James Kwak paraphrasing Barney Frank:
Of course, none of this will matter in the end because, as someone (Barney Frank?) said, you can't get elected saying things would have been even worse without you.
The harsh realities are that:
1.) pointing to the TARP bailout--which was only the most highly-publicized of more than 20 other taxpayer-funded Wall Street programs--belies the trillions of dollars the government has expended to bailout the fatcats across-the-board; gjohnsit had a great diary about just a handful of these other, 20+ programs, including the most expensive bailout of all (one which is still virtually ignored and/or glossed over by the MSM, even now), just the other day: "The most expensive bailout of all, and no one is talking about it"
2.) approximately half of all Americans simply do NOT have a 401(k) or a pension; the "Wall-Street-is-doing-great" meme simply doesn't resonate with much of our Party's base
3.) we're into the first leg of a crushing commercial real estate downturn
4.) the commercial real estate (CRE) bust will do more to undermine an already-struggling small business environment than most realize, simply because Main Street businesses have always relied upon the mid-sized and small community banks for the lion's share of their credit needs, and these are the same banks that are going to feel the brunt of the CRE meltdown
5.) meanwhile, the residential mortgage meltdown is nowhere near over
6.) the Congressional Budget Office doesn't project unemployment returning to to 2006/2007 levels until 2018, as...
7.) most states' balance sheets are nothing less than a fiasco, already, and they will reach levels--if they're not there already--where draconian budget cuts will become more present by the day, as early as this Summer
8.) concurrent with items #3 through #7, above, the tax base of the majority of our states and countless municipalities is being nothing less than eviscerated
...and here are additional harsh realities from Dave DeGraw's posts--he references it as the "Casualties of Economic Terrorism, Surveying the Damage," and I've listed these twice before, but the redundancy is appropriate IMHO--over at Alternet.org, from less than three weeks ago, linked HERE and HERE (where you'll find the links to substantiate these claims, below)...
9.) America is the richest nation in history, yet we now have the highest poverty rate in the industrialized world...50 million Americans currently live in poverty.
10.) 50 million people need foodstamps to eat.
11.) 50% of all American children will use foodstamps at some point in their childhood.
12.) 20,000 people are being added to these totals everyday.
13.) In 2009, one out of five households didn't have enough money to buy food.
14.) In households with kids, this statistic increased to 24%.
15.) We have 50 million people living without health insurance.
16.) 1.4 million Americans filed for bankruptcy in 2009; this is an increase of 32% versus 2008.
17.) Medical bankruptcies are responsible for approximately 60% of all bankruptcies. Over 75% of all people who file bankruptcies due to midcal costs have health insurance.
18.) We have the most expensive health care system on the planet; we're forced to pay twice as much for it as other developed countries; but we rank only 37th in the world in terms of quality of care.
19.) Americans have lost approximately $5 trillion from their pensions and savings since this economic crisis began.
20.) We've lost $13 trillion in home value during this period, as well.
21.) "During the first full year of the crisis, workers between the age of 55 - 60, who have worked for 20 - 29 years, have lost an average of 25% of their 401k."
22.) Personal debt has risen from 65% of annual income in 1980 to 125% today.
23.) 5 million people have lost their homes, already.
24.) 13 million families are expected to lose their home by 2014.
25.) Currently, 25% of all American homeowners are "under water," owing more on their homes than they're worth.
26.) Deutsche Bank predicts that 48% of U.S. homeowners will be underwater by the end of 2011.
27.) Every day, 10, 000 U.S. homes go into foreclosure.
28.) Homelessness is dramatically increasing, with over 3 million Americans currently considered homeless.
29.) The fastest growing segment of the homeless population is single parents with children.
30.) The U.S. prison population is now 2.3 million. We incarcerate more people (as a percent of our population) in the U.S. than anywhere else in the world.
31.) A recent study by the Hartford Advocate tells us that a new prison opens every week somewhere in America.
32.) Millions of Americans are at a point where their unemployment benefits are now coming to an end.
33.) More workers have been out of work for a lengthier period of time than at any time since they started tracking these statistics.
34.) A record 20 million Americans qualified for unemployment insurance in 2009.
35.) Without federal intervention, 27 states would have run out--or did run out--of funds to cover these claims.
36.) 40 state unemployment programs are expected to go broke.
37.) It is projected by many that millions of Americans will remain unemployed for very extended periods of time. (They already are.)
38.) More than six people are looking for work for every job that's available.
39.) Americans are already the most productive workers on the planet; productivity increased by annualized rate of 9.5% in the third quarter of 2009, alone, but labor costs decreased by 5.2%.
40.) As a result of #39, above, some companies are now experiencing record profits. 78% of the 220 of the companies in the S&P 500 had "...'better-than-expected profits' with earnings 17 percent above expectations, 'the highest for any quarter since Thomson Reuters began tracking data.' "
41.) According to the US Department of Labor's Bureau of Labor Statistics, household income fell by 3.8% in 2008, and that was while the unemployment rate was at 5.8%
42.) "With the unemployment rate now at 10 percent, median income has been falling at a 5 percent rate and is expected to continue its decline."
It kind of speaks for itself, don't you think? That being said, tonight, Simon Johnson reminds us of the harshest reality of all...
# # #
THE TRUTH: "They Saved the Big Banks But Kind Of Lost The Economy Doing It."
As Simon Johnson asks us, tonight: What's actually been done to make sure this doesn't happen again?
And, the answer is, sadly: NOTHING.
I've written about this, extensively, most recently, HERE and HERE.
Yesterday, Johnson went to town on the matter...
They Saved the Big Banks But Kind Of Lost The Economy Doing It
By Simon Johnson
Baseline Scenario
March 8, 2010 at 11:17 am
It would be easy to take relatively cheap shots at the portrayal of Tim Geithner -- "we saved the economy but kind of lost the public doing it" -- in the New Yorker, out today.
1. Mr. Geithner is quoted as saying, "Some on the left have fallen into a trap set by the Republicans, allowing voters to mistakenly think that the biggest part of the bank bailout had come under Obama rather Bush." Mr. Geithner should know - as he spearheaded the saving of banks and other financial institutions under both Bush and Obama. In fact, it's the continuation of George Bush's policies by other means that really has erstwhile Obama supporters upset.
2. "I think there are some in the Democratic Party that think Tim and Larry are too conservative for them and that the President is too receptive to our advice." Probably this is linked to the fact that Tim Geithner is not a Democrat.
3. Geithner also suggests that his critics compare government spending on different kinds of programs under President Obama: "By any measure, the Main Street stuff dwarfs the Wall Street stuff." This insults our intelligence. Wall Street created a massive crisis and we consequently lost 8 million jobs; any responsible government would have tried hard to offset this level of damage with all available means. This includes fiscal measures that will end up increasing out privately held government debt, as a percent of GDP, by around 40 percentage points. It's not the fiscal stimulus, broadly defined, that is Mr. Geithner's problem - it's the lack of accountability for the bankers and politicians who got us into this mess...
Bold type is diarist's emphasis.
Johnson tells us Cassidy was just too subtle. And, Johnson provides us with the "less subtle" version. Essentially, it's the elephant in the room. We've done next to nothing to prevent this from happening again. Geithner went through the charade of the stress tests which belied the commercial real estate, residential mortgage and credit card defaults that are now unfolding (or, still unfolding), a year later.
After the stress test results were announced, Johnson reminds us that what we did was "...communicate effectively that there was a government guarantee behind every major bank or quasi-bank in the United States. Of course this works in the short-term - investors like such guarantees. But there's a good reason we usually don't guarantee all financial institutions - or act happy when other countries do the same. Unconditional bailouts lead to trouble, encouraging reckless risk-taking and undermining responsible governance. You can't run any form of reasonable market system when some big players hold 'get out of bankruptcy free' cards."
Again, Johnson reiterates, we've done NOTHING to insure this doesn't happen again.
In the New Yorker article, as Johnson reminds us, Geithner actually brings up the concept that the administration has " ...'proposed the biggest regulatory overhaul in seventy-five years.' This is the worst conceit...Legislation may tweak the details, but the regulation and control of systemic risk remains just as weak as before."
Johnson rhetorically asks if Geithner's completely unaware that our biggest banks are now bigger than ever? And, he eviscerates him for sending out Deputy Treasury Secretary Herb Allison to parrot the hubris-laden lie that our government has "...no too big to fail bailout policy." We're reminded that even the "Volcker Rules" now maintain massive loopholes that make that entire effort meaningless.
Johnson closes out his post by stating the truth that if we continue to allow these banks to grow, as we are now, it will become virtually impossible to save the system the next time it crashes. The system, itself, Johnson warns, is already getting to the point where we're now morphing from "too big to fail," to "too big to save." Next time, there will be much more "massive collateral damage."
Next time, Johnson points out, "...we'll lose a lot more than 8 million jobs."