Joe Stiglitz told Bloomberg that the bailout was doomed by conflicts of interest.
BREAKING !!!
Not.
The Obama administration’s plan to fix the U.S. banking system is destined to fail because the programs have been designed to help Wall Street rather than create a viable financial system, Nobel Prize-winning economist Joseph Stiglitz said.
"All the ingredients they have so far are weak, and there are several missing ingredients," Stiglitz said in an interview. The people who designed the plans are "either in the pocket of the banks or they’re incompetent."
TARP isn't big enough, they don't want to ask Congress for more money, and refuse to take over control of the banks in any meaningful way. The return to taxpayers may be around 25 cents on the dollar. Suck on that.
The Public Private (yeah right: 85% public, 15% private, at best) Investment Plan for investing in toxic assets is "a really bad program," says Stiglitz, because it will enrich investors at at guess whose huge expense? Take a wild-assed guess, and win a prize. Imagine investing trillions upon trillions and losing 75% of it. Actually, no imagination is required. You will ascertain the results of this thought experiment via direct perception.
"You’re really bailing out the shareholders and the bondholders," he said. "Some of the people likely to be involved in this, like Pimco, are big bondholders," he said, referring to Pacific Investment Management Co., a bond investment firm in Newport Beach, California
I guess there is some truth to the notion that Obama is a "socialist" as a result of transferring wealth from the hapless po' folk to the fabulously wealthy lugals who incurred incomprehensibly breathtaking gambling debts.
"The statement from Sheila Bair that there’s no risk is absurd," he said, because losses from the PPIP will be borne by the FDIC, which is funded by member banks.
"We’re going to be asking all the banks, including presumably some healthy banks, to pay for the losses of the bad banks," Stiglitz said. "It’s a real redistribution and a tax on all American savers."
Yes. This is the plan. It's not complicated after all. They bet and lost. You pick up the tab.
Stiglitz then whipped out his brass teabags by suggesting that Geithner, Rubin, and Summers are the wrong people for the job.
"America has had a revolving door. People go from Wall Street to Treasury and back to Wall Street," he said. "Even if there is no quid pro quo, that is not the issue. The issue is the mindset."
"Even is there is no quid pro quo..." is a charming construction, ain't it?
As for the Wall Street mind-set, it's simple: We're rich, you're not. Give us your money, then fuck off and die.
Stiglitz also pissed on Obama's stimulus package, calling it inadequate, flawed by the inclusion of ineffective tax cuts, little help to ordinary americans (what's half a trillion for unemployed chumps compared to 12.8 trillion for banksters?), and overall, "peculiar policy." I like to trill my "r"s when I say "t-r-r-r-illion" and "peculia-r-r-r," because it makes me feel like a person of good breeding, like George fucking Will.
Basically, the banksters are trying to re-inflate the bubble. It's not working. The stock rally is a phony consequence of all the money sloshing around.
Meanwhile, Mike Whitney reminds us that:
Retail sales fell in March as fearsome job losses and tighter credit conditions forced consumers to cut back sharply on discretionary spending. Nearly every sector is seeing declines including electronics, restaurants, furniture, sporting goods and building materials. Auto sales continue their nosedive despite aggressive promotions on new vehicles and $13 billion of aid from the federal government. The crash in housing, which began in July 2006, accelerated on the downside in March, falling 19 per cent year-over-year, signaling more pain ahead. Mortgage defaults are rising and foreclosures in 2009 are estimated to be in the 2.1 million range, an uptick of 400,000 from 2008. Consumer spending is down, housing is in a shambles, and industrial output dropped at an annual rate of 20 per cent, the largest quarterly decrease since VE Day. The system-wide contraction continues, with no sign of letting up.
Foreclosures and job losses are accelerating. Goodbye tax receipts. Goodbye buying power.
Bernanke's financial rescue plan is a disaster. He should have spent a little less time with Milton Friedman and a little more with Karl Marx. It was Marx who uncovered the root of all financial crises. He summed it up like this:
"The ultimate reason for all real crises always remains the poverty and restricted consumption of the masses as opposed to the drive of capitalist production to develop the productive forces as though only the absolute consuming power of society constituted their limit." (Karl Marx, Capital, vol. 3, New York International publishers, 1967.)
Bingo. Message to Bernanke: Workers need debt-relief and a raise in pay not bigger bailouts for chiseling fatcat banksters.
Mike Whitney
I wish Obama would discover which way is up and get his shit together, but I'm not confident.