Posts tagged bailout

The best articles I read last week

By Stream of Consciousness on March 29, 2009
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The Huffington Post’s Paul Dailing casts a hilarious critical gaze on the “Death of Newspapers” meme that pervades twitter and the “blogosphere” in How to Become a “Death of Newspapers” Blogger

The Toronto Star surveys the lay of the land in Canadian broadcasting after huge cuts to the CBC this week and the potential of more cuts at the private broadcasters in TV tumult on the Canadian dial

NPR and WNYC’s “On the Media” looks at the JP Neufeld, a Concordia University student in Montreal who stopped a an act of school violence before it happened, 3000 miles away in the UK: The Long Arm of the Law

The Atlantic’s The Quiet Coup is a devastating examination of the role and influence of the finance and banking sectors over the entire American political process. 

Ian Brodie, Harper’s former chief of staff , asserts that evidence doesn’t matter when making public policy via Macleans.ca

The Totalitarian Temptation and all that is an examination of the tendency towards totalitarian belief systems on both the left and right. I loved it, but I care about this sort of stuff. Link to  http://crookedtimber.org/ via @MikeSoron

Zombie Banks Devour Tim Geithner’s Brain

By admin on March 22, 2009
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I just read Krugman’s lament. The Obama Administration, and specifically Treasury Secretary Tim Geithner have, at long last, put forward a plan. But it’s a terrible plan that doesn’t address the fundamental rot at the heart of the global economic crisis. Or as Krugman put it, “The zombie ideas have won.”

From the Times article Krugman references, it is clear that his frustration is justified, in that the US Treasury Dept. just handed over a trillion dollar blank cheque to the zombie banks. Furthermore, even with another trillion dollars thrown into this bottomless pit, the people saddled with the responsibility of fixing the banking sector (and, more importantly, the credit markets) are still underestimating the scope of the crisis and are longing for the good old days of inflating bubbles.  

The proposal’s fundamental assertion is that the nuclear waste from the securitized sub-prime morgage market is being undervalued and that the best way to fix this problem is for the US government hand private investors “generous subsidies, in the form of low-interest loans, to coax investors to form partnerships with the government to buy toxic assets from banks.”  The moral hazard inherent in this proposal is lost on Tim Geithner. As Krugman put it: “this is an open invitation to play heads I win, tails the taxpayers lose.”

The biggest problem is that these zombie banks are dead. They are under-water in a sea of red ink, but some of them have reached the magical level of systemic risk that’s made them “too big to fail.” And in reaching this disgusting size, the zombies managed to completely envelop the entire American political system in their grip. 

As political unpopular as it may to seem, the only sensible proposal is temporarily nationalizing the banks (and de facto banks, like A.I.G.), while freezing all foreclosures.  This is the only way to amputate the zombie appendages currently strangling the global economy.

What American cable news thinks about AIG bonuses.  

By Stream of Consciousness on March 16, 2009
This entry is filed under Media, Politics, TUMBLD and tagged , , .View Comments

What American cable news thinks about AIG bonuses.  

Links: Con Men, Black Holes, a War Hero and Global Banking Insanity.

By admin on March 9, 2009
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From the NYT “A.I.G., Where Taxpayers’ Dollars Go to Die” A.I.G. is proof of the existence of black holes.

Late Black Hole Update: Boing Boing reports that a secret A.I.G. briefing document was leaked revealing $1.6 Trillion in exposure to derivatives. These are the same derivatives that Warren Buffet called “financial weapons of mass destruction” and pose a “mega-catastrophic risk” for the economy. The worst is yet to come. *sigh*

The Globe & Mail: “Canada Envy, Amid a Global Meltdown” Canada is well positioned to weather the storm because we were innovative – sane and rational in the regulation of our banking sector. Note the slick  flash map of global banking insanity.

Terry Gross of NPR’s Fresh Air interviews Donovan Campbell, an Iraq war vet,  about his new book “Joker One: A Marine Platoon’s Story of Courage, Leadership, and Brotherhood.” The scenes he describes are heart wrenching, and the interview borders on him breaking down in tears:  So incredibly powerful.

On the Media looks at “The Confidence Man” and provides some context for us on the history of con men in the US. Particularly apt is the point of implicit acceptance of the con, by those who can “pass it along.” Look for the comparison of the Florida real estate bubble to the proliferation of random currency in the 1850s. “Is this condo (or bill) worth anything?” Society tacitly accepts the con, one transaction at a time, when they decide it doesn’t matter as long as you’re not the one that ends up with the hot potato.

The Zombie Problem

By admin on March 6, 2009
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March 6, 2009

Any keen observer of the deepening financial morass we’re faced with, and there’s many armchair pundits – myself included,  recognizes that the problem began with sub-prime mortgages and the securities they were packaged in to. The investment banks  that bought and sold these highly speculative “investments,” their insurers who underwrote them *ahem* A.I.G. *ahem* and the credit rating agencies that provided the toxic waste with AAA ratings can all take their healthy share of the blame for how we got to where we are.

The financial media also deserve a lion’s  share of the blame, and Jon Stewart’s evisceration of CNBC (US link / Canadian link) this week was truly “Must See T.V.”  As an aside, there’s also been some excellent commentary on what journalists can learn from this comedian, who many seem to think is doing a better job reporting than most reporters. [link via Jay Rosen]

But there’s a bigger problem: how US political leaders are structuring the bailout.

To contextualize how the bailouts began, the philosophies guiding the decisions and the characters and personalities behind the scenes that presided over the both the largest financial meltdown in history and, at that time, the largest (failed) financial bailout I highly recommend PBS Fronline‘s indispensable look Inside the Meldown, an hour long documentary that aired several weeks ago.

So where does this all leave us?

Tim Geithner, Obama’s Treasury Secretary and Federal Reserve Chairman Ben Bernanke are pursuing a strategy of throwing good money after bad buying these “troubled assets” and propping up the “zombie” financial institutions one bailout failure at a time.

NYT Columnist, and 2008 Nobel Prize winning economist, Paul Krugman points out today:

Earlier this week, Ben Bernanke, the Federal Reserve chairman, was asked about the problem of “zombies” — financial institutions that are effectively bankrupt but are being kept alive by government aid. “I don’t know of any large zombie institutions in the U.S. financial system,” he declared, and went on to specifically deny that A.I.G. — A.I.G.! — is a zombie.

This is the same A.I.G. that, unable to honor its promises to pay off other financial institutions when bonds default, has already received $150 billion in aid and just got a commitment for $30 billion more.

The truth is that the Bernanke-Geithner plan — the plan the administration keeps floating, in slightly different versions — isn’t going to fly.

In other words, US political leaders, including Obama himself, better remove their heads from their asses immediately lest we all fall victim to Obama’s own dire worst case scenario: “an economy that sputters along for not months or years, but perhaps a decade.”

-@andrewmcintyre

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