[Cross-posted at The Left Coaster.]
Markos Moulitsas and Frank Rich agree on one thing: the primary political and policy failure (among many) of the Obama administration was and is the rescue of the finance industry with no reform or accountability. Unfortunately for Obama and us all precisely the same scenario very well may play out again soon with Bank of America, but the results better not be the same this time.
While Treasury Secretary Paulson launched TARP in 2008 with a ridiculous fanfare of mission with a trifling $700 billion Congressional loan program Chairman Bernanke of the Fed quietly began 2 incredible evolutions: direct capital loans to foreign and domestic banks totaling an incomprehensible $16 trillion dollars, plus at least 2 evolutions of buying vast amounts of mortgage-backed securities (Krugman).
There is a semi-plain report of the Sanders audit online (my sincere apologies to Senator Sanders, I was simply unaware of it). At this time there seems to be no plan for auditing the “easing” evolution of the Fed entering the securities markets.
Of course while all this was going on the administration shamefully let the little people program for troubled mortgages—HAMP—completely fail, simultaneously trying to squelch any States Attorney General investigations on criminal bank foreclosure behavior. Precisely separate from the bailout issue, these mortgage market moves supremely reek—a virulent, creeping reek fresh cat shit couldn’t hope to compare to—severely damaging Obama administration credibility with Finance policy just as they’re about to need it the most.
For little people like me the $16 trillion loan mechanism isn’t exactly clear, how no-interest loans (free money, the Fed says it all got paid back) precisely saves a finance institution is murky. But the end result we can all trust with the judgment of Dr. Atrios, they got a do-over. Wreck the economy and your companies with criminal stupidity? Keep your jobs, get a free do-over, get no new regulations to stop the crooked behavior, and then lavish yourselves with millions in bonuses.
Wow. Every time I type that scenario the frightening political power of it is breathtaking, playing with fire doesn’t come close to describing it. Only the most chumpish, completely bought and churlish political opposition would ever let a politician get away with it.
Different story, the frightening and most pressing Finance issue is the regulatory failure of the first bailout, for it looks as if Bank of America is going to fail. Again. Its stock price is down approximately 50% in four months, its public statements for liquidity have been show to be pure lies, and last week Warren Buffet injected $5 billion in capital to shore up the bank. Reviews of the Buffet move have been mixed, but it appears the evolution won’t save the bank, and prudence demands that we assume it will fail, we and the Administration should be ready for that likely scenario.
[It’s surprising to me all the terrible news hasn’t started a public run on Bank of America already, but we shall see.]
A great lost opportunity of the auto bailout was re-structuring of production, there was nothing to stop us from dictating GM produce only hybrids and electrics for a fleet mileage average of 90. Instead we sided with management again and knifed the UAW with two-tier wages. We all know how the outrageous bank and finance bailout worked out the first time, and if Bank of America gets another do-over it will not be free this time, no freaking way.
Bank of America will never be allowed to fail, by the way. Not in this political culture.
So if and when the second do-over day arrives for Bank of America, all those senior executives in their suits and jets? Fired. Immediately terminated with a Department of Justice investigation into their little finance games. Real enforceable regulations to keep that bank from so stupidly getting into securities mortgage trouble again, executive compensation limits, hell we could make it a de-facto public bank set up for the little people. Why shouldn’t we?
The notion Bank of America will just get another free do-over if it fails is one of the most incredibly stupid, explosively potent political scenarios I can ever imagine. It’s entirely plausible that day will easily arrive before election 2012, and if the Obama Administration dares to try it again all bets are off, the incredibly explosive power of that possible event could easily smash all other political elements of the election, plus the Obama Administration itself.