A World-Historical Swindle
A Posts entry from Sunday, October 26, 2008Joe Nocera writes in the Times that banks receiving pieces of the $700 bn. bailout package are actually hoarding the money instead of using it to make loans more accessible. In fact, not only hoarding the money but in some cases using it to buy out other banks!
Perhaps this is why Paulson’s “no strings attached” bill was so fucking idiotic in the first place: if the government has no ability either to monitor what these pieces of shit are doing with taxpayer money or to actually enforce the laws (what some might refer to as the raison d’etre of a “government”), then what good was the fucking bailout to begin with?
Let’s hope this isn’t another case of a world-historical swindle perpetrated by the financial oligarchy. If there is any sliver of justice left in this world, and there is little hope of that, all of the CEOs of the banks that violate the spirit of the $700 bn. bailout ought to be thrown in prison and the banks immediately nationalized.
As Ben Popken of Consumerist writes:
What is the government doing to make banks use the money for loans? Apparently, jack except for asking really really nicely. If this continues and banks don’t use their government handout to open up loans, this bailout will be the single greatest ripoff in American history, and those responsible are naive if they don’t think they’ll have a giant bloody revolution on their hands.
If the elite are simultaneously trying to justify further transfers of wealth from the poor to the rich by raising the claim that “progressive” economic intervention constitutes “socialism”, perhaps a fruitful strategy for the Left would be to take these claims seriously by putting together some decent socialist legislation.
Jason
I’m not a fan of the bailout for a lot of reasons. However, I’m not sure we should be too upset that banks aren’t opening up the flood gates for loans again. While the money hasn’t been flowing as easily as it did over the past several years, isn’t that…kind of a good thing? I’d hate to seen a return to the lending standards of yore, and it’s not as if there’s been a freeze in the market like pundits pretend. Loans are still flowing pretty well, just down from their previous unsustainable highs. Frankly I’m more concerned about where the $700 billion is coming from.
Bryan Klausmeyer
I’m not upset that banks are not immediately issuing loans again, what I’m upset about is the fact that the $700 bn. worth of taxpayer money is being used to line the pockets of the people who run the banks: the entire point of the bailout was that the money was to be used in order to lubricate the financial market, i.e., to prevent the market from further decline, and the best way to do that in our insane society is by making sure loans are accessible, especially for small and big businesses. And the fact that the banks are using the money to buy smaller banks is just compounding the problem further, since consolidation of capital in the hands of a few mega-financial institutions is exactly what this crisis demonstrated to be a horrible development, i.e., one mega-financial institution collapsing can cause the entire market to tumble.
I was opposed to the bailout from the beginning and still am, but now that it’s already passed it’s important to remember why it was passed to begin with. If the money isn’t being used for that explicit purpose, then that’s a problem that the government ought to deal with.
Mark Elliot Cullen
“Loans are still flowing pretty well, just down from their previous unsustainable highs.”
Nope, the problem we’re having right now is called a “credit crunch”, a severe type of liquidity crisis. The injection of capital was a direct response to the lack of available credit in the market.
See Not Just a Liquidity Crisis; Rather a Credit Crisis and Crunch.
or
See Wikipedia.
or Reuter’s “Crisis in Credit” series .
Jason
I’m fully aware of what a liquidity crisis is. The problem with that article, and with the punditry in general, is that there’s no strong data to support it. In particular, it appears that commercial paper is trading at a negative real interest rate, and the overall quantities aren’t down that much from their previous highs over the past few years. I’m sure housing has slowed down a lot, but that’s to be expected. Coupled with the fact that Bernanke is attempting to organize worldwide central bank loose credit policy (apparently a 1.5% fed funds rate isn’t good enough), I’m really not worried about liquidity.
Jason
Also, a paper just came out of the Minneapolis Fed to this effect. It’s really fucking boring and dense, but the gist of it is the same as what I said, which is that the markets are by no means freezing up. I’ll leave the link if you want to bother.
http://www.minneapolisfed.org/publicationspapers/pubdisplay.cfm?id=4062
Bryan Klausmeyer
bryklaus@umich.edu
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