Roubini, Richardson: We Can't Subsidize Banks Forever

Wall Street Journal:

Consider also recent bank risk-taking. The media has recently reported that Citigroup and Bank of America were buying up some of the AAA-tranches of nonprime mortgage-backed securities. Didn't the government provide insurance on portfolios of $300 billion and $118 billion on the very same stuff for Citi and BofA this past year? These securities are at the heart of the financial crisis and the core of the PPIP. If true, this is egregious behavior -- and it's incredible that there are no restrictions against it.

Read the whole story: Wall Street Journal

Comments

[ssfahrer]

As long as we have FDIC insurance for deposits (now at $ 200,000 per account or more depending on how the accounts are set up), then as banks fail and are liquidated, we are, in effect, subsidizing the banking system FOREVER. Bank managers would have to be more prudent if there were LITTLE OR NO FDIC INSURANCE to act as a backstop for stupid behavior (unless they want to face the wrath of the mobs of ex-depositors as what happened in the Great Depression with regularity)....

[WorkingClass]

Stress tests = white wash. The banks, the government and the tax payers are all broke. Insolvent. They all owe so much money that they can never (thats never) pay it back. Next we debase the currency and then we are Brazil.

[ssfahrer]

Then we find "The Boys from Brazil"???

[TJCole]

Yes we can, that's our new governmental and economic structure America exists for the banks, and the people live to serve and enrich the banks through endless debt...

[Rule Of Law]

"Consider also recent bank risk-taking. The media has recently reported that Citigroup and Bank of America were buying up some of the AAA-tranches of nonprime mortgage-backed securities. Didn't the government provide insurance on portfolios of $300 billion and $118 billion on the very same stuff for Citi and BofA this past year? These securities are at the heart of the financial crisis and the core of the PPIP. If true, this is egregious behavior -- and it's incredible that there are no restrictions against it."

IF THIS IS TRUE???

If this is true I want to know if AIG is still "insuring" these things against losses? Isn't this exactly the behavior that got us into this mess? Aren't we talking about Derivatives--Part Deux? This is like having Hannibal Lecter over for dinner.

[sposton]

What is worse: allowing torture or allowing and enabling a wholesale rape of our nation? ;-)

[Sundialsvc4]

Don't expect crime to stop of its own accord ... especially if the criminal perceives itself to be comfortably protected by its cronies in Congress, the Fed, Treasury, SEC and so-on.

Crime NEVER stops of its own accord.

[platanoman]

Receivership is not the issue. FDIC have taken over a lot of banks. Some of the banks like Bank of America and Wells Fargo are not necessarily insolvent like Roubini thinks. They are capitalized.

[Clayton139]

We should have been listening to Nouriel Roubini since, way before 2007 ! ! !

[Carolab]

"And we shouldn't hear one more time from a government official, "if only we had the authority to act . . ."

We were sympathetic to this argument on March 16, 2008 when Bear Stearns ran aground; much less sympathetic on Sept. 15 and 16, 2008 when Lehman and A.I.G. collapsed; and now downright irritated seven months later. Is there anything more important in solving the financial crisis than creating a law (an "insolvency regime law") that empowers the government to handle complex financial institutions in receivership? Congress should pass such legislation -- as requested by the administration -- on a fast-track basis."
_________

Agreed, 100%. FDR wrote the Emergency Banking Act March 6, got it passed March 9, and the banks were shuttered, cleaned up and reopened March 12.

Granted, this is more complex and will take a little longer but the banks could continue operating in the meantime under receivership.

Why shouldn't we expect some emergency legislation in this crisis?

[PhilipTaylor]

Agree 100% we can do all this NOW! Geithner/Emanuel Team simply protecting the Executives!

Krugman met with Obama and now it is time for Stiglitz and Roubini to meet with Obama.

Let's just HOPE OBAMA Listens to Krugman with all the "INSIDE PRESSURE" from Volcker, Summers, and Geithner it will have to weather tremendous PUSH BACK!

Lets hope he told Krugman he has a PLAN for MAIN STREET since Wall Street and Congress could care less!

[Carolab]

I would feel so much more confident knowing he was listening to them all, as well.

Clearly, there was an agreement at the G20 by the members of the IMF to continue in this manner -- and explains Geithner's repeated comment about being concerned with "the system as a whole".

That's the only thing that makes sense to me.

[MuchMadness]

Maybe the crisis is not bad enough yet to create the political will to act.

[Carolab]

Maybe people are either uninformed or too lazy to find out the truth.

Or maybe they are all in denial.

And maybe the rest of us need to get busy.

[themodernleader]

Roubini recognizes that if we contiue to attempt to bail-out the bank presidents' audacious, enriching fraud we will endanger our own currency. I am told that we have obligated 13-14 trillion dollars that we don't possess. However we have spent and distributed about 2.5 trillions as of May , 2009.
Will we honor the obligations to Freddie Mac and Fannie Mae and FDIC and the pension guarantee fund and on and on when they come do? Only a damned fool will attempt to meet obligations that destroys our currency, economy and government. We need to prepare for terrible times and spend money only for life saving and producing activity. Spending money on broken banks is the height of timid and cowardly leadership.
Now we are even unwilling to support a strategy to discover from the banks what is our actual liability form the fraud and folly of money and banking. Poor decision making results from faulty data and other bad information. Our leaders are either under alien control or they are breaking under the strain of bad news. You asked for the job. Now perform the way you promised.

[murphy80]

are you kidding me, corporate welfare has gone on for years.

if left to compete by themselves, they would have folded forty years ago.

[Carolab]

Are you kidding me? This is nothing like what has "gone on for years".

[PartyPartyParty]

Isn't the business world always reminding us that, "If it looks like a duck and quacks like a duck, it's a duck?"

If it looks like fraud and smells like fraud......

[BlueZoo]

Sigh...and the rich just get richer while we poor slobs can only sigh!

[knosiswar]

The Quiet Coup
http://www.theatlantic.com/doc/200905/imf-advice
Author: Simon Johnson, a professor at MIT"s Sloan School of Management, was the chief economist at the International Monetary Fund during 2007 and 2008

"But there"s a deeper and more disturbing similarity: elite business interests"­financiers­, in the case of the U.S."played a central role in creating the crisis, making ever-larger gambles, with the implicit backing of the government, until the inevitable collapse. More alarming, they are now using their influence to prevent precisely the sorts of reforms that are needed, and fast, to pull the economy out of its nosedive. The government seems helpless, or unwilling, to act against them. "

[Carolab]

And Simon knows why, too. He used to work for the IMF. The IMF is calling the shots here--this recapitalization, stimulus programs, "quantitative easing" is all a program they were "recommending" at least since last spring under Paulson.

IOW, it's a scheme put in place by the international bankers.

[joebaggadonuts]

The government isn't playing with a full deck yet. As the article states: We were sympathetic to this argument on March 16, 2008 when Bear Stearns ran aground; much less sympathetic on Sept. 15 and 16, 2008 when Lehman and A.I.G. collapsed; and now downright irritated seven months later. Is there anything more important in solving the financial crisis than creating a law (an "insolvency regime law") that empowers the government to handle complex financial institutions in receivership? Congress should pass such legislation -- as requested by the administration -- on a fast-track basis."

So, CONGRESS, make it so! NOW!