Maddow: Did America Get Punked On the Bailout? Yes...Now Here's What to Do

I appeared on Rachel Maddow's MSNBC show last night to discuss my latest newspaper column about the bailout. You can watch the clip here. Rachel's first question really is the question of our time: Did we get punked? As progressive bailout critics have been saying since the current Wall Street bailout was first proposed, the answer is yes.

As the Minneapolis Federal Reserve reports, the major claims about a credit crisis that justified Congress cutting a trillion-dollar blank check to Wall Street were demonstrably false. And new data and reports show they remain demonstrably false.

For instance, take a look at line 1 and line 5 of this December Federal Reserve report on bank lending. That's right - you see no significant decrease in lending, and in some cases, an increase. Interbank lending has dropped some, but certainly not at the crisis levels the Bush administration and banks claimed.

Then there's this story from the Wall Street Journal looking at a new study by the National Federation of Independent Business:

The report found that among small businesses "no "credit crunch" has appeared to date beyond the normal cyclical tightening of credit." The NFIB found that worries about interest rates and financing were a concern to only 3% of respondents...By and large, the story of the NFIB report was that if credit is going untapped, it's largely because company operators are not choosing to pursue the credit. It's not that companies can't get the extra money, it's that they don't want or need it because of the broader slowdown in economic activity. (emphasis added)

That last point is the big one: The real crisis is in the real economy - ya know, the real world of jobs, wages, health care premiums and pensions that Washington has totally ignored as it keeps writing checks to its well-heeled campaign contributors on Wall Street under the guise of a lending crisis. Adding insult to injury is the last thing I discussed with Rachel - the fact that because the bailout money came with almost no strings attached, the financial industry recipients of the taxpayer largesse are either hoarding the money, using it to pay shareholder dividends and executive bonuses, or devoting it to efforts to buy up smaller competitors.

So what to do?

First thing's first - we have to pressure, cajole, lambaste and downright humiliate Wall Street stooges on Capitol Hill who claim nothing can be done. These are people like New York Sen. Chuck Schumer (D). The recent subject of a scathing New York Times profile examining his complicity in the financial crisis, Schumer insisted to the Wall Street Journal that despite Congress's clear power to reform - or even revoke - the bailout, "there's not much we can do other than jawbone." It's the old Innocent Bystander Fable, designed to make us think Congress can do nothing other than keep forking over the money to campaign contributors. And it's a straight-up lie.

Second, Congress can reject the Bush administration's request to release the next $350 billion installment of no-strings-attached bailout money for Wall Street, if that request happens.

Third, Congress can add all the strings and oversight measures to the remaining money that bailout critics originally said were necessary. That means eliminating gaping loopholes in the executive pay limits; preventing the money from subsidizing shareholder dividends, forcing the government to buy voting shares of bank stock (rather than non-voting stock as it is doing today) so that regulators have the leverage to clean out bad bank management; following Britain's lead in making the money contingent on increased lending; and expanding the ways the money can be used, so that it can be allocated to the real economy (ie. manufacturing companies, etc.).

Finally, Congress can allocate the unspent bailout money to a robust economic recovery package focused on job-creating infrastructure and health care priorities - and Congress can pass that economic recovery package right now, rather than waiting for the next president.

Looking at what's gone on in the last 3 months, we see a classic example of Naomi Klein's "shock doctrine" and subsequent disaster capitalism. Bailout critics were attacked as "irresponsible" by Establishment pundits and politicians - even though the data showed that those pundits and politicians were using an admittedly real problem to manufacture the perception of a full-on earth-shattering crisis so as to justify the biggest taxpayer heist in contemporary American history. And though that data was largely ignored by the same media that beat the drum for the bailout, it is now becoming too compelling to ignore.

As the real economy is ignored by Washington and as the government's own numbers expose the shameless dishonesty of the Beltway's bailout proponents, it's time for our leaders to listen to the real pragmatists who have been right all along.

Cross-posted from the Campaign for America's Future

Comments

[gfunk30]

You know. I didn't believe it at first, but the more this financial crisis plays out, the more it looks like a run up to establishing the NAU. The banks had to see this mortgage bubble coming. You cannot tell me that all of their high-priced economists/analysts that they employ had no idea that this mortgage buying frenzy was not sustainable. One thing I know, is that the people making the decisions did not get to where they are by being incompetent. This was out of design. They collapse the economy, we the people go through a world of hurt financially, then they offer an alternative solution: The NAU.... They did they same thing in Europe when they introduced the EU. You can see the realignment occurring in each distinct industry, if it hasn't already. Mass consolidations, (Banks, telecoms, probably cars cos next...) union busting, decrease in personnel benefits, weakening of the dollar... With the Financial Bailout, they are just getting all of the money back that they lost in pulling off this scheme, at the taxpayers expense. This is more than being punk'd. This is one of the greatest crimes ever pulled off in the history of mankind.

[mmckinl]

Yes ! We're getting Punk'd

The Myth of Increased Lending in The Fed's Latest Figures ...

What are we seeing in the increase in all these categories ? I mean companies are borrowing less for inventory and expansion. People are buying fewer houses and cars and just about everything else. On top of that banks are writing hundreds of billions off their books as bad debt ! Yet the borrowings keep going up!

Could it be that the banks are unwinding their off the balance sheet SIVs (Structured Investment Vehicles) onto their books as they were required to do by Jan 1, 2009, until recently, when it was pushed back.

That sure would explain how their balance sheets could expand when nobody is borrowing. It would also explain the swelling of banks level 3 assets. In the real world Level 3 assets are called marked to "marked to make believe" .. Yves Smith has a great post on this Quelle Surprise! Banks Increase "Mark to Make-Believe" Assets to $610 Billion.

So the big increase in lending is just the reclassification of the SIVs off balance sheet bank assets (debts) on to the balance sheet. As soon as they got there the banks wisely classified them as level 3 assets so that the accountants or auditors would have to give them a pass on the validity of their worth.

This is exactly why we need FDRs Bank Holiday or the Swedish Plan, to sort this mess out.

[000Jade000]

Punked is an understatement.

The REAL bailout tab is $8.5 Trillion so far. If people think that taxpayers won't be responsible for all of the Federal Reserve's bailout programs, they are silly.

We are looking at what could be much worse circumstances than existed during the Depression years. Millions more will lose their homes in the coming years as the Alt-A mortgage bubble bursts, and more people are unemployed. There is a real chance with the Fed's recent interest cut and plans for "quantitative easing" that we could see a hyperinflationary depression.

Meanwhile, these jackasses in Washington are doing NOTHING to help ORDINARY Americans.

Madoff is the big target right now, but he's only one of probably thousands of frauds out there. Our entire economy is nothing but a giant Ponzi scheme. Paulson and his criminal friends are just scrambling in the vain hope that they will keep us from realizing that.

Listen to Max Keiser's latest radio show here:
http://karmabanqueradio.com/

[Ricktay]

I agree the "credit crisis" is rooted far more in the loss of earnings/spending power among a large number of people, along with the collapse of home prices that removed another source of consumer cash. Reduced demand for loans and reduced ability to repay them than are the real culprits.
The 'credit crisis" appears to be one more ruse to remove risk from the investor class. Sadly, it is working beautifully for them. I'm not sure the same average joes who've seen their meager spending power diminished for years can influence congress more than the wealty who got the bailout handed to themselves without having to "pressure, cajole, lambaste and downright humiliate" anyone.

[benjaminblue]

Like Mr. Bush, the Wall Street CEOs are not humiliated by their inhumane, yet all-too-human, greed and deception.

They do not notice, let alone care about, the people they hurt in the process. They are concerned, only, with lining their pockets.

And so it is the little people who must be embarrassed about losing jobs, losing homes and having no money for even the most basic expenses. It is the little people who must bear the shame of being unable to provide a modest Christmas for their families and friends.

It is beyond time to incarcerate Mr. Bush and the corrupt Wall Street (and other) CEOs who collect obscene salaries even as they crush the hopes and dreams of decent, honest, hard-working Americans. It is time to teach them some humiliation. They, too, must crawl in the dirt.

[Michale32086]

You DO realize that it was Democrats in collusion with Bush that pushed thru the Wall Street bailout, right???

Michale.....

[RoloTomassi]

It ws both democrats and republicans...last I heard Bush wasn't standing in for congressional republicans when it came time to vote on the bailout.

[RTIII]

About half the Dems are actually nothing of the kind - they're infiltrators who some call "Republican-Lite". Among them are Nancy P, Harry R, S Hoyer - and MANY others...
.

[TRYKER]

Well, the only people who haven't appeared before Congress to BEG FOR MONEY are the PEOPLE!
So, lets gang up and go to Congress and start stating our cases. Lets go there and not leave until WE are heard by the great representatives that take our money and hand it over to crooks, as regularly as the clock strikes 12.
Lets DEMAND yeah DEMAND for a change, see what that gets us. Lets demand a cap on credit card interest rates, a removal of FEES that made $60 Billion in profit last year for the card cos.
Lets DEMAND that empty houses be opened for the homeless .
Lets DEMAND that oil cos give back the windfall profits taken when the oil was artificially inflated by the energy traders.
Lets just DEMAND the hell out of Congress. Let them see that WE the people are mad as hell and are ready to TAKE rather than give to the rich elite. Thank you very much.

[totaldisbelief]

just how do you intend to back up your demands? with foot stomping and nasty retoric? Threaten legislators that you won't vote for them anymore?
What backs up your demands?...civil disobedience?

[Michale32086]

Congress went against the people when they pushed thru the Wall Street bailout.

What makes anyone think Congress is going to start listening to the people now??

Michale.....

[totaldisbelief]

Silly.......the Sheeple don't count.

[Indedave]

"First thing's (sic) first - we have to pressure, cajole, lambaste and downright humiliate Wall Street stooges on Capitol Hill who claim nothing can be done."

I watched and listened to you on Rachel's show last night, David, and am in complete agreement with your observations. The question I have is what, exactly, can "we" do? Send e-mails to politicians who represent other states or districts? Been there, done that. They don't even bother to send an auto-reply. E-mail the media bosses/reporters? Same thing, same results. Blog about it? Same results.

Passage of the TARP was just like the vote to invade Iraq, except the timeline was compressed by an order of magnitude. When the Secretary of the Treasury appears out of nowhere to say our democracy is doomed if we don't act now, no politician wants to be seen as voting to seal our doom. The problem, as I see it, is that if the intelligence is faulty, but presented as ironclad truth requiring immediate action, heads need to roll when the truth comes out. Unfortunately, we have developed a de facto ruling class whose only allegiance is to itself.

[RTIII]

OK, so I agree completely. Yet, when EVERY SINGLE CALL to the DNC over the sell-out was AGAINST, and, according to two of their staffers there wasn't a SINGLE call FOR the sell-out, and yet our "leadership" sells us out anyway, it's time for us to elect new people.

The problem is, people often forget just how bad THEIR person is.

We need to win New Blood in the PRIMARIES, where the real battle is to be fought. We're going to see Dems everwhere due to Junior's failures - and taking the Rs down with him, the question is; what KIND of Ds will we be hiring?! And THAT we decide in the PRIMARIES...
.

[ADunafraid]

That was shocking and great work at the same time David.

Now if you could also focus on debunking the hysteria about deflation that every news channel is trumpeting right now that would be great.

Although we are fairly cautious because of the economic conditions my company has had two much better months due to reduced fuel costs, reduced hotel rates, and hopefully we will see reduced costs for office supplies shortly. Captialism is about supply and demand not about maintaining constant inflation in order to depress real wages to create profit growth. Not all businesses are only focused on growing profits as compared to the prior year.

[RoloTomassi]

Many small pockets of companies will do better, and some quite well, but the majority isn't by any stretch of the imagination; I mean, that's great for you, I' glad to hear it, but the overall status can't be seen as overly optimistic because of the microcosmic success of a few odd birds.

[exkiodexian]

Hilarious. No, I mean that.

What can WE do? According to Sirota, we can "pressure, cajole, lambaste and downright humiliate Wall Street execs". Right. I'm sure that will have the intended effect. God knows that if there's one thing that Wall Street execs respond to, it's being shamed on blogs.

The remaining advice is "Congress can blah blah blah ...", which is not something WE can do. We are not Congress, and as average Americans are finding out Congress does not represent their best interests.

So we are still left with this fact: Wall Street has literally ROBBED Americans of trillions of dollars, YOUR dollars, aided and abetted by the federal government.

What are YOU going to do about it? Whine? Cry? Commiserate? Blog? No one cares, just other bloggers.

What are YOU going to do about it? Write a letter to the Editor? To Your Congressmen? The letters end up in the garbage.

The Wall Street execs are LAUGHING at us as they use OUR dollars to pay their multi-million dollar bonuses and fund junkets to exotic locales. Laughing because they know we will do NOTHING about because we can't. So go ahead, blog away.

I ask again, What are YOU going to do about it?

[RoloTomassi]

Okay Laughing Boy, here's your big chance:

Enlighten us.

[Rule Of Law]

Hi Rolo, I think his point is that there is virtually nothing, short of turning this country into a big version of what's going on in Greece, we can--or are willing?--to do. I feel the same frustration and anger. And you know he's right about us being robbed. I wish Sirota would lead more of an active movement--with all the 60's meaning that word implies--with other progressive bloggers and activists and find a way for us to take this right up Constitution Ave. But I'm not holding my breath.