Dear Mr. Maher,
I love your show, I love your humor, I love your perspective, I watch you whenever I can. For the last several weeks, though, I have found myself screaming at the TV during your show.
For some reason (I don't know why), you don't respond to my rants (it is almost like you can't even hear me), so I thought I would take my outrage up a notch and write this sternly worded letter.
So, what's my beef? In short, the bank bailouts did NOT work, and it would be great if you would stop saying that they did.
Why does this matter? By propagating the "the bailouts worked" meme, you are misleading your audience, and creating a bailout friendly environment that the bankers need to get their next handout.
"Next handout? Aren't the banks doing better than ever?" you ask. Grab a haz-mat suit, some goggles and a nose plug, and follow me below the fold...
Do you know what lies in the heart of the financial crisis? Shit. A big, stinky pile of toxic shit that sits on the banks balance sheets. For most of us non-farmers, shit is not something that we like to have around, we literally flush it out of our lives as quickly as we can, and it is most certainly not considered an "asset". But to our banks, they love the Shit. They love it so much, that they keep it around in HUGE quantities, and have slapped a big, ole "Asset" label unto it. They can't get enough of the Shit.
I know what you are thinking: I really don't care about the banks sick Shit fetish, those coprophiles can do whatever it is that they do, the less I know about it the better, but why bother with the Asset label?
This "Asset" label is very important for accounting (cough, fraud) purposes. The banks need their shareholders and the government to think that their shit is worth billions and billions of dollars, and that the "Total Assets" line of their balance sheet, continues to balance with the "Total Liabilities" line of that same balance sheet. (If the liabilities out number the assets, that business is officially toast.) If the banks had to be honest about what their shit is actually worth, that would require a write down of their assets, and a formal acknowledgement of their insolvency.
In the spring of 2009, the FASB made a dramatic change to the accounting rules that "govern" how the banks estimate the value of their assets. Basically, this rule change now allows the banks to value their Shit at whatever they want it to be. The previous rule was know as "Mark to market", because the assets were valued (marked) at the current market prices (what the market would bear). The new rule might as well be called "Mark to Perverted Banker Fantasy", because that is exactly what it is.
Let me give you an example. You know all of those big McMansions in the ex-urbs of Southern California that sold for, say, $2.2 million in 2006? Based on what you know of the SoCal housing market today, what are the chances that those homes would sell for $2.2 million? Since the bank that holds that $2.2 million asset can longer sell it for $2.2 million, the market price is closer to $1 million, doesn't it make sense, in order to have an accurate account of the banks real assets, to market it down to what it is actually worth on todays market. It makes sense to me, but it isn't happening, thanks to this rule change.
The only way to really, truly save the banks (and recover the larger economy) is to clean the Shit out of their books. In 2008 and 2009 we had the chance to get rid of the Shit collection and treat it like Shit should be treated, by flushing it out of the system, but we didn't do that. Between the cash from the taxpayer, and the accounting rules changes, the banks were allowed to continue unabated and unreformed. That brings us to now, fall 2010, just over two years after this all started crashing down.
What the bailouts and the accounting change did was paper over the problem and kick the can down the road. The banks got to pretend that they are profitable again (look at all this cash we have!) and pay themselves millions of dollars because they are so fucking smart, but the reality is is that the Shit at the heart of all of this is still there, and it is shittier than ever. It is a ticking time bomb of excrement, that is about to explode!
The foreclosure mess (aka Foreclosure Gate) that we are seeing now will hopefully expose this Shit storm for what it is. Unless of course, new rules changes and new taxpayer bailouts are put in place to protect the bankers from the trouble that they have created. WE CANNOT LET THIS HAPPEN. A TRUE RECOVERY CANNOT BEGIN UNTIL WE FACE THIS MESS HEAD ON.
I will say it again: By propagating the "the bailouts worked" meme, you are misleading your audience, and creating a bailout friendly environment that the bankers need to get their next handout.
I should also mention that you cite the success of TARP as your evidence of the efficiency of bank bailouts. TARP was probably the most known bailout program, but it was not the only one. (For the record, TARP has NOT been paid back in full: http://money.cnn.com)
For further information on the plethora of bailouts out there, please see this: Zero Hedge: Bailout fo Dummies. The author is attempting to simplify complex financial systems to make them understandable for the rest of us, don't let the title of this piece dissuade you.
Not enough info? Still don't believe me? One of the reasons that I love your show is guests that you have. Over the years, your guest have included Elizabeth Warren, Eliot Spitzer, Simon Johnson, Matt Taibbi, Andrew Ross Sorkin, and Nourel Roubini. Bring any one of them on your show, they will do a much better job of explaining this than I ever could.
If you really want to get deep into this, send your researchers over to the great financial blogs that are doing a great job of exposing these crimes and explaining the complexity to everyday people like me: Naked Capitalism, Calculated Risk, and Zero Hedge, just to name a few.
Please, please, please stop saying that "the bailout's worked". They didn't. In fact, they made the problem worse.
Other than that, I love your show, please keep up the great work.
Sincerely,
Kate Conner