When the Next Banking Scandal Hits...
The way Tim Geithner has structured the banking plan, the Obama administration will, sooner or later, almost certainly be facing another AIG bonuses-type of outrage. For example, Dean Baker told me that his biggest fear is that some sleazy character will make a fortune off the leverage given by the government, or that a bank will arrange an insider deal under which a front buys its assets at an inflated price, leaving the government with a big loss.
If this happens, I can already hear the cries of the faux populists in the Republican Party, those same folks who created this crisis with their opposition to regulatory oversight of Wall Street. If they were still in charge, we'd be having one of these kinds of scandals every week. But they will be full of howling indignation that Obama let this happen.
Those of us who are opposing this bank plan, in part because we are worried of just these kinds of scandals described above, will need to restrain ourselves from doing too much I-told-you-so-ing, because we will need to be helping to save the Obama team from themselves. We need to be ready, though, to step into the moment with our own very aggressive plan to put the banks into receivership and break them up. No matter how populist Republicans will want to pretend they are, they will never be willing to actually do something that progressive. If Obama is willing to go there, and do it decisively, it will help Obama to get over all the recriminations and saber-rattling that inevitably happens in such a moment.
I very much wish that Obama was moving bolder and more progressive in dealing with the banking crisis. To paraphrase a friend, I feel like he is giving mouth-to-mouth resuscitation to a system that needs to die. But if we are to get through the problems that will almost inevitably come from the Obama/Geithner plan, those of us who want to save Obama's agenda need to be ready with a strategy to turn things around ASAP when another scandal flares.
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Only one way out. Stop the bailout. If the companies die then let them. Wall Street claims they are smart. Some instituitions maybe saved by brains. But these brains are not working to save their companies they are working on schemes like you mentioned plus additional bailout and how to hide their bonuses and salaries. Will the govt hired wall streeters actually save wall street making a fraction of what they would normally make.
No more bailouts. Hire Buffett for Treasury secretary
Tim Geithner is a train wreak waiting to happen! His policies are "screw the taxpayer", "reward the incompetent management" centered. Turns out that obama replaced the Bush people with a pack of thieves who are pushing taxpayer money into the hands of other thieves with no accounting of who is getting it and what they are doing with it. And we are supposed to see this as "good"?
Read Ariana's article about the "bank-centric universe".
We need a citizen-centric solution.
Cut the FICA tax from 7.65 down to 4.0% - Give everyone, individuals
and businesses an automatic 3.65% raise. Lock Social Security
up and the Gov can only borrow what's left after we have enough for 67
years. Take away the SS ceiling; everyone pays 4%.
Sign an Executive Order that says ALL Federal Agencies must
buy goods manufactured ONLY in the U.S. Aim for 15%-20%
per year until we reach 80% or above.
Attach strings to the money we "stimulate" banks with; they must
lend out at least 50% to small businesses and 25% for new cars
and 25% home buyers.
Get rid of Geithner & Summers.
But the #1 mistake Obama is making is the same mistake
Bush Junior made. Not asking the American people to
sacrafice. Bring the speed limit down to 55 MPH and
save 20 Million gallons a day; ask those with more to
pay more; Start a voluntary draft, after making the peace corp
a cabinet position. Every High-School graduate must do 3 years
in the Peace Corp or Military for a 4 year college or technical
education; utility companies giving percentage breaks to houses
with children that have above a C average, etc
Dyzynsky, you lost me when you mentioned Obama and Bush Junior (who is he?) in the same sentence. How could you? And please don't tell people who lost their jobs or homes to sacrifice more and to slow down to 55 miles and have youngsters for three years serving in the peace corps, doing what? There are no jobs. You and your ideas sound like something a guy named Hitler decreed in the 1930. In case you don't know it, we have some kind of Democracy in this country. .
Despite the fewer middle names, GW Bush was known in the family as Junior before he got involved in Texas politics. I agree it's trivial to ask exactly the innocents who suffer the worst in this crisis to make sacrifices. The Peace Corps and the military might be worthwhile make work to employ some people and sustain their health. They should be allowed to make their own decisions while the government merely keeps the option open.
Locking up Social Security monies is ridiculous: it's only paper, and it's more practical to burn it (if you really want to take it out of circulation which is probably a really bad idea) than guard it since we can just print some more when we need it.
Hitler had specific ideas for his third Reich utopia including the death of some disabled, gays, and minorities. Workers were locked into their jobs in a kind of industrial serfdom. His National Socialist Party loathed socialists and communists, assigning them among those to be killed. Despite the admiration of people like Henry Ford and that ilk, he wasn't a very nice person. He was fond of animals.
In other words dyzynsky, your plan is that all must submit themselves for indoctrination by the state, or be unable to afford college, and thusly freezing social mobility for people who DON'T want to be reduced to the worst mindlessly unquestioning automatons any institution produces, save for those made by organized religion?! Great plan!
Tell you what. You can go first. We've been propagandized, and our will abused quite enough, thank you.
If the banks are truly insolvent, why aren't people (virtually) lined up around their doors trying to get their savings out. They either have no savings, or they trust the banks enough to leave the money there. The reality is that this is not yet an insolvency problem, it is still a liquidity problem. - as in there is not enough capital to make loans so cheap that it causes another financial bubble. We are returning to a stable sustainable economy;slowly, painfully, and with cries of woe. But we are returning. What a lot of people don't like is that a sustainable economy does not mean 8% growth it means 2 or 3% growth. It does not mean a stock market generating profits at 35% it means a stock market making 2 or 3% a year It does not mean big bets at the casino it means working hard, technological innovation, investment, and persistence through hard times and good times. Boom and bust are not sustainable in today's global economy. Slowly rising and sinking tides are the norm, not an aberration. Full employment can only occur in an economy that spreads the profits fairly, it cannot occur in an economy that unfairly rewards one or two big winners. It is time to plan for a real future economy and stop acting like children who have had their toys taken away.
Most people don't have more than $250,000 (which is insured by FDIC) lying around in their bank accounts. Most people's savings were in their 401K (now worthless) and homes (likewise). What's left to pull out? What savings are you talking about? Those folks with more substantial savings were the ones playing Wall Street and, yes, they ARE out on the streets of Washington, DC, begging for a bailout. What do you think the Geithner plan is all about?
More importantly, Americans over the last few years at least have had a aggregate negative savings balance for the first time since (say it with me) the last Great Depression. This has been coming for a long time now. The Banksters saw it coming because they created it. Then they did what they always do: Lay plans to make obscene profit from it, by stealing from the very peasants they've starved into a fuge of desperation and anger, even as the whole thing comes down around our ears.
Ask yourself something. Why are the insolvent, inflexible, monopolistic, incompetently run car companies being thrown under the bus over a mere FRACTION of the money that the insolvent, inflexible, monopolistic, incompetently run banks are having frantically shoveled upon them? Guess who owns the government? It sure as hell isn't us...
The banks are insured through FDIC, and ordinary accounts are safe. Specific paper and some CDs are not covered.
I, too, think that full employment follows the equitable distribution of profits. Americans have been unable to fulfill their role as consumers because they are paid too little. They tried spending their wages as fast as they got them, mortgaging their homes and credit card debt in their heroic and needful efforts to consume. Some firms tried exporting their product which, so far as they were successful only enriched the rich without supporting US sales. The problem isn't that they stopped buying cars but that they stopped buying anything as the money ran out. They did not inspire the development of other market items which might have substituted for cars and made new jobs.
What Obama, Geithner and Summers are doing, proves again the old adage, "There is no right way to do the wrong thing."
You're right... but I wish there is something more we could do to get President Obama to see that this bank plan is more of the same failed trickle down policies he campaigned against BEFORE the next banking scandal hits... instead of cleaning up after.
let the War of Position begin!
The banks are insolvent. Bankruptcy, in one form or another, is what's supposed to happen. Giving out free money is merely a cosmetic solution that doesn't actually fix anything.
The administration is pursuing two misguided objectives: to recapitalize the securitized debt markets and to reinflate the real estate market. Both of these efforts will promote credit inflation in the short term but will ultimately cause the markets to find the same pin that popped the bubble in the first place.
I haven't been able to get a clear read on how President Obama thinks about the financial situation -- whether there's any daylight between Geithner/Summers and himself, whether he's content to delegate decisions on financial issues, whether this is the prelude to an unexpected feat of leadership, whether he's been purchased as a puppet for Wall Street, etc.
I have no doubt that Obama is an extraordinarily talented man who can accomplish most everything he really wants to do, but I'm not sure exactly what he's trying to do with the financial system or whether he's working with our best interests at heart.
It's not looking so good so far.
Well said. The no strings attached doesn't seem to apply to Mr Obama, as he may be the puppet of which you speak. That, and every rich person in this country has deep fear of the public crossing the fine line between chaos and order as "the titanic" continues to sink. If there is a run on the banks all hell will break loose. The new administration is caught in a pickle, but seems to be prolonging the inevitable, and I voted for them in hopes of change. Disillusioned? So far.
Dear Mike
I wish that were all true - that there were a potential for a progressive answer to the failures of the federal reserve debt-money banking system.
Unfortunately, the progressive solution has been more of the same, with regulation.
You can say we need to get back to Glass Steagall.
Separation of financial powers is of course better than the bigger must be better mentality.
But unless you want YOUR grandkids to have to do this all over again, what really needs to happen is for progressives to overcome their monetary identity crisis.
And, by that I mean, get an identity.
Harken back to a hundred-plus years ago.
Public money was the progressive cry.
The Greenback Party had been absorbed into the progressive and populist parties, and the monetary plank by the democratic party.
Harken back to 1933, progressives economists provided real reform plans for the FDR administration.
We settled for Glass-Steagall rather than the Chicago Plan for Monetary Reform.
Here we are today.
Stiglitz. Reich. Galbraith. Kuttner. Baker. Klein.
Do any of them have a monetary plank as substantive as the Chicago Plan?
No, let's go for bringing back Glass-Steagall.
And have the grandkids do it all over again.
Greenbacks.
A REAL new way forward.
Oh, yes, Mike. Self-restraint. Americans are so very good at that, aren't they?
I'm sure Obama will do "everything in his power to stop it",,,,,while making sure they get their ill gotten booty. Just like last time.
I wish they would replace Geithner will Mr. Robert Reich.
Hell, he's probably too smart to jump in the briar patch Geithner / Summers will leave behind--IF anyone can actually get them out....
The way the economy is being handled, there will surely be another scandal. The government and banks are reinflating the bubble, just like they have done with every crisis since the Fed came into existence. They always create another bubble out of the carcass of the old one, and the new bubble always collapses.
I disagree. I think we need to go at Obama hard and pile on mercilessly. Otherwise, he will continue on this disastrous path of trickle down recovery. He has hired thieves and they are - surprise - thieving.
absolutely correct.
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