By George Washington of Washington’s Blog.
On September 25th, I wrote:
Paul Volcker and senior Harvard economist Jeffrey Miron both testified to Congress this week that the government is trying to make bailouts for the giant banks permanent.
Writing Wednesday in The Hill, Congressman Brad Sherman pointed out that :
In my opinion, Geithner’s proposal is “TARP on steroids.” Section 1204 of the proposal [the proposal being the “Resolution Authority for Large, Interconnected Financial Companies Act of 2009”] allows the executive branch to use taxpayer money to make loans to, or invest in, the largest financial institutions to avoid a systemic risk to the economy.
Geithner’s proposal reminds me of the Troubled Asset Relief Program (TARP), the $700 billion Wall Street bailout adopted last year, but the TARP was limited to two years, and to a maximum of $700 billion. Section 1204 is unlimited in dollar amount and is a permanent grant of power to the executive branch. TARP contained some limits on executive compensation and an array of special oversight authorities. Section 1204 contains absolutely no limits on executive compensation and no special oversight.
When I asked Geithner whether he would accept a $1 trillion limit on the new bailout authority (if the executive branch wanted to spend more, it would have to come back to Congress), he rejected a $1 trillion limit, insisting that the executive branch be able to respond without coming back to Congress.Both TARP and the Treasury proposal have vague provisions under which taxpayers might possibly recover any money lost through a special tax on the financial services industry. Under the Treasury proposal, only the very largest institutions could benefit from a bailout, but the special tax, if ever collected, would fall chiefly on medium-sized institutions.
Thus, the medium-sized institutions will be at a competitive disadvantage for two reasons. First, the largest institutions will be able to borrow money more cheaply because their creditors will believe that if the institution is unable to pay, the taxpayers will. Second, if there ever is a bailout benefitting a very large financial institution, the tax will be imposed on the medium-sized institutions.
Sherman is a senior member of the House Financial Services Committee and a certified public accountant, so he has a good nose for analyzing proposed financial regulations.
Last week, Sherman made the following comments to the Washington Independent regarding Congress’ proposed bill on the too big to fails:
That is a huge gravy train to the top 20 [financial institutions] because it allows them to borrow money at a lower rate. Think of what this does to moral hazard.
I’m not looking for a TARP on steroids with oversight. I’m looking for an end of TARP.
The House Committee on Financial Services will hold a hearing on the bill tomorrow, with Tim Geithner, Sheila Bair, John C. Dugan (Comptroller of the Currency), Daniel K. Tarullo (Governor, Board of Governors of the Federal Reserve System), John E. Bowman (Acting Director, Office of Thrift Supervision), Richard Trumka (President, AFLCIO), and others as witnesses.
As the Washington Independent points out, Sherman is going to try to take Tarp off of steroids:
Sherman said he intends to offer a series of amendments addressing the issue during the Financial Services panel’s markup of the bill, which has yet to be scheduled. Included will be a provision to cap the president’s bailout authority at $1 trillion, and another to strip out the resolution authority language entirely. A potential third proposal — to create an oversight panel like that monitoring TARP funds — is one he’s leaning against.
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Great post …
As Senator Dick Durbin said said about banks referring to Congress “Frankly they own the place.”
The executive branch better not get this authority. Why is congress so eager to give away their power to apportion funds? One world government of/by/for the bankers is hard to ignore with these kinds of proposals.
The government is essentially creating “credit ghettos.” Favored borrowers receive funds and explicit and implicit tax payer guarantees disfavoring those companies that must borrow at market rates. The economic effects of such a policy are worrisome and ultimately detrimental to the vast majority of industrial companies and smaller financial institutions. Those outside the government umbrella ultimately borrow at a penalty rate. We are favoring the inefficient over the efficient. In a capitalist society why is government allocating credit in the first place?
See http://www.prophetwithoutprofit.com/2009/09/16/credit-ghettos/
This is lunacy wrapped in insanity bound up in craziness!
I used to wonder something along the lines of: “How did the Germans stand by and let Hitler and the Nazi ideology rise?” – I don’t wonder anymore – I now understand.
I’m not equating this with the Nazi’s, but with a rise of something very destructive, virulent and out of control. What am I going to tell my kid when he grows up?
Tell him about how it was in the old country and how you fled and how you struggled to make it in India/Brazil/Russia/ China, or wherever you wound up upon fleeing Überpastor Huckabee’s Christ Police as an economic refugee and leftist atheofascist terrorist.
Lao Dem,
Framing the conflict as some Chiliastic battle between religionists and atheists is erroneous, and certainly plays right into the hands of TPTB.
Mike Huckabee or Richard Dawkins, Pat Robertson or Daniel Dennett, Jerry Farwell or Christopher Hitchens, Billy Graham or Ayn Rand—what we have here are twins, each wearing a different hat, one hailing from the right side of the political spectrum and the other from the left.
If the supernatural dogma of greed and selfishness proselytized by New Atheists like Dawkins, Dennett, Hitchens and Rand is stealth religion, then by the same token the this-worldly theology imparted by Calvinists like Graham, Farwell, Robertson and Huckabee is stealth neoclassical theory.
Durbin is right, banks own congress
Durbin is no winner either
Hank Paulsen was able to swing a huge bailout of investment banks at taxpayer expense. Congress didnt even read the bill. GS got 100 cent on the dollar.
Flash trading is stealing from the citizens but it is ok because it creates large political contributions.
Republicans and Democrats have both sold out taxpayers
Taxpayers will pay for Comm RE bailouts as well so that large contributions can go to politicians as political favors.
The only way to change things is to bullet vote out all congressmen and senators.
“Hank Paulsen was able to swing a huge bailout of investment banks at taxpayer expense. Congress didnt even read the bill.”
Slight correction if I may: Congress read the first bill ( it was really short) and hated it. Then, they read the amended version, this time because it was full of goodies for themselves AND their districts, (to the tune of 105 billions thank you very much!) and passed it, over the strenuous objections of the taxpayer.
That is all Hank & Co. needed: a bit of political savvy, (read: legalized bribery) and voila!
Needless to say the banksters know how to invest their money, since nothing gives you a more astronomical return on investment than buying politicians.
“Government Is Trying to Make Bailouts for the Giant Banks PERMANENT”
They should be. Why wouldn’t they? The giant banks own and control the government.
Deception is the strongest political force on the planet.
Formally making them permanent that is. I think we all knew they were from the get go, it’s just going to be official.
I notice also although the failure/need to loan to a megabank is inevitable at some point in the future, no insureance-type fund is established that banks have to contribute to in advance of the failure.
Instead when the inevitable failure comes, we’ll be told that the last thing that the other megabanks need at this point is an equity reducing special tax. The tax will thus never be collected.
I keep wondering what was that moment like in history that gave men the resolve to sign the Declaration of Independence. If the people of today were faced with the exact same circumstances would we have that same resolve? Or would those great men who signed the Declaration today possess that same resolve?
Lets just get it over with and issue all US citizens the newly available Federal Reserve/US Treasury Lifetime Platinum Card!!
Think about it, $50,000 limit at 0.00001% APR, and if you happen to overstretch yourself don’t worry about it, we have the power to bump your limits whenver you thinks its necessary. Just ask nicely.
Acrue enough points and win a 2012 Chrysler/Fiat hybrid!!!
(Card not available for citizens with productive job that hasn’t destroyed and pillaged a good part of society for a term of at least a decade)
Apply now!
If this creates a permanent RTC for liquidation purposes, this is good. If it is to keep failed firms on government life support, bad.
A blank check to bail out bad actors. How far is that from a license to steal?
It looks like we’ve come back around to Paulson’s original demand to be made a formal Treasury dictator.
I guess the main difference is that this demand is longer than 3 pages.
Per my passing remarks of last week, ‘we’ll be seeing a lot more of this.’ TARP was a ten-run homer for the money center banks around to engorge themselves on it; a money-printing machine with no accountability or payback worth the name, unending. Of course they all want to continue it: they’ve just annexed the sovereign credit and credit fiat of the US government to their private gain.
When, last year, I spoke of the TARP takeover as a soft coup of corporate fascism, this is exactly what I meant. There is no firewall in this scheme between the government the private capitalist, between the pseudo-regulators and the putatively regulated; none, gone. Wide Boy A goes to Guv Flunkey (and former employee) B and says, “I got a problem; you make mye good, plus a little vigourish to play the markets with.” And its done.
This scheme—in American English not British English—is bad enough for the citizen, but the real loser of first resort are all the other players in the banking system. The middie banks; the credit unions; the small businesses who have to borrow at market rates not crony rates. They are too small to matter by the standards of this scheme, and so they will be _permanently penalized_ by having to compete with subsidized behemoths who not only have advantages of size and reach but whose every loss will be made good so said behemoths have EVERY INCENTIVE TO PUSH MARKETS INTO LOSS ZONES since this will drive the small fry out of the game entirely.
The soft coup just gets worse. There’s only one way this ends, the question is just how long it takes. Cue magic lantern slides for Paris, 1790 . . . .
great thoughts, Richard, as usual. you need a blog, dude.
When I think about who has been injured in this crisis, I don’t think of the foreclosed or the GM granny shareholders. Really, they should have known better in most cases. I think of my local bank, Commerce Bank and Trust in KC, MO. Even though this bank is still making good money and has a tiny % of non-performing assets, their caution, prudence, and forestight have gone unrewarded. They have been punished for not taking undue risk. Ridiculous!
curlydan,
But it’s those decent bankers that the banksters hide behind, as became manifest at the ABA convention in Chicago:
Bob Schmermund, executive vice president of ABA membership, told the conference Monday. “What the protesters may not realize is who’s attending this meeting. This room is literally filled from stem to stern with traditional bankers whose life’s work is dedicated to serving the needs of their communities.”
http://www.suntimes.com/business/1847981,CST-NWS-bankers27.article
As to the complacency of the honest bankers, here’s what Martin Luther King counseled:
[I]t is as much a moral obligation to refuse to cooperate with evil as it is to cooperate with good. Noncooperation with evil is as much a moral obligation as the cooperation with good.
–Martin Luther King, “Love, Law and Civil Disobedience”
trying? I would say they have.
“First, the largest institutions will be able to borrow money more cheaply because their creditors will believe that if the institution is unable to pay, the taxpayers will. Second, if there ever is a bailout benefitting a very large financial institution, the tax will be imposed on the medium-sized institutions”
O, what a wick web we weave, when first we let freaking idiots and losers, who won’t let people who have empirically demonstrated that they DO NOT KNOW how to loan or invest money, Fail!
This is straight out of Atlas Shrugged. You can make fun of that book as literature but oh my God, did that woman see where we were headed more than fifty years ago.
She wasn’t writing literature; she was sounding an alarm.
Welcome to Feel Good Fascism. How does it feel?
Ayn Rand was a sociopath whose religion of greed and selfishness, because it found such willing acolytes in powerful figures such as Greenspan, Rubin, Summers, Bernanke and Geithner, unleashed untold suffering upon the world.
That this woman, who lived in a fantasy world completely divorced from reality, could call herself an “objectivist” is one of the great ironies of our time.
When it comes to “scientific” endeavors, surely Rand ranks right up there alongside the Nazi scientists, second to none in her ability to use a perverse distortion of natural selection to justify an ideology that can be described as nothing short of evil.
Rasputin with a wig.
Drifting slowly but surely into a banana republic.
Stop injecting money!
Break them up!
Lets see who are the major stockholders of these to big to fail banks Citi Bank= Saudi Prince, Bank of America = Chinas Sovran wealth fund. They have no intention of playing the capitalist game they have there own political structure to gain economic control. These banks are some of their big guns. The government of the USA has sold us out.
IMHO
No institution is too big to fail, and that includes the United States of America. While we are hell bent to save a selected few ‘primary dealer’ banks, the nation is drowning in excess debt; or, credit money if you prefer.
You cannot sugar coat the cure, all of that debt that cannot be serviced must be extinguished as rapidly as it can be identified.
Giving tide-me-overs to bankrupt institutions is giving life support to a brain-dead patient.
@DownSouth – Your rant does nothing to counter the fact that the book describes what is happening in this country right now.
I don’t care about Rand or objectivism but it is remarkable how prescient the book was and is.
middyfreek,
Rand’s prescience was a self-fulfilling prophesy. It became true only because her religion of greed and selfishness was adopted and implemented by powerful men like Greenspan, Geithner, Summers, Bernanke and Rubin. The careers of these men were of course buoyed by a finance sector whose interests were served by Rand’s pernicious ideology.
How can we explain the fact that Ayn Rand’s ruinous dogmas resonated with a broader American public? It’s mystifying, but this certainly isn’t the first time something like this has happened:
It colors my thinking and shapes my attitude toward events. I can never forget that one of the most gifted, best educated nations in the world, of its own free will, surrendered its fate into the hands of a maniac.
–Eric Hoffer, The True Believer
Rasputin in drag, I should have said.
The glib words about banksters controlling government that I see in many of the posts above(and more broadly in comments on Yves’ site) completely misunderstands the power relations that exist between politicians and businessmen, and the political purpose of the regulatory regime that is rapidly being imposed on vulnerable parts of the private sector.
The last thing congressmen and senators want is clarity and simplicity in regulation, such as would exist should Glass-Steagall or some equally straightforward almost self-enforcing financial regulatory system be reinstated.
When regulation is simple and the line between permissible and impermissable is clear, there is little room for individual members of congress and the senate to exert pressure to get specific results in specific cases. When regulation is complex and proper decisions are far from obvious, due to such things as overlapping jurisdictions, inconsistencies in laws and rules, and the use of inherently flexible terms like “too big to fail” or “systemically important,” there is plenty of room for a congressman or senator to make a few calls and push decisions that favor a friend, associate, family member or contributor.
This is the power politicians desire. It is the deliciously gratifying power of the lord to command and to be obeyed. There is the rush that comes from seeing one’s orders obeyed, watching supposedly powerful officials and businessmen jump to it. Even more gratifying is the parade of supplicants such power assembles (waiting hours for a moment of face time, then flattering, cajoling, groveling when the master deigns to appear), and the large retinue of camp-following staff and consultants drawn to such power, (hoping for bit of derived power and reflected glory).
Of course, this turns the rest of us into beggars.
For a practical demonstration of the truth of that of which I write, I refer all to today’s (10/29) Wall Street Journal (front page) article: “Politicians Butt In at Bailed-Out GM.”
DownSouth – Look I know that Greenspan was/is putatively a disciple of Rand. But his actions say otherwise. He, and the other three bozos you mention, are exactly the people that Rand was railing against.
Apparently Rand, and/or the book, go against the grain with you. That’s fine, you’re entitled to see her and her so-called philosophy any way you choose.
But the book hit the nail on the head, and if you can’t give credit where it’s due, that doesn’t speak well for you.
Exactly. Greenspan, like just about everyone in Washington, says one thing and does another.
Rands novel, while fiction, provides a play by play of what is occurring today.
Greenspan, Bernanke, Paulson, Geithner…. all criminal elements of our country.
middyfeek,
Well I certainly “give credit where it’s due.”
To argue that Ayn Rand didn’t have anything to do with our current morass is tantamount to arguing that the Nazi scientists didn’t have anything to do with the Holocaust.
And for those who haven’t seen it and are interested in what the underlying scientific dispute is about, this video presentation from the Science Network gives a rather concise heads-up:
http://thesciencenetwork.org/programs/beyond-belief-enlightenment-2-0/david-sloan-wilson
I have to disagree with both of you.
First, I think Rand’s influence is far less than DownSouth believes. I see what appears to be a “movement” spearheaded by Rand more akin to “parallel evolution” born of similar innate human psychological makeups. Without trying to be too perjorative of Rand and others afflicted with her type viewpoint, these “acolytes” do seem to be sad misanthropes focused on a paramount fear of what individuals banding together could do to their “genius.” Not that there is no reason for fear of groups and mobs. But there is a difference between healthy fear and unhealthy phobia. I don’t exactly know the line between the two, but let me “Potter-Stewart” it and say I know it when I see.
Second, I think the idea that Rand “predicted” all this to be a very selective and narrow reading of both her work and “all this.” I might be convinced otherwise with a detailed list of all the “predictions,” but color me *extremely* skeptical.
Rep. Sherman has no chance of stopping this train. Barney Frank chairs the committee and its his bill. The Financial Services Roundtable, the US Chamber of Commerce and the American Bankers Assoc and a host of other campaign contributing industry representatives in Washington will all insist that House Members vote yes (same as they did with TARP). The bill language provides members with the benefit of claiming that they voted yes because the bill authorizes a tax on the financial industry to pay for future bailouts which saves taxpayer money and severely punishes Wall St should it act irresponsibly again. The MSM will conveniently neglect to point out that the potential tax is just window dressing to cover up the actual transfer of control of the U.S. Treasury to Wall St.
Listening to the hearing now. Geithner is slightly prone to hyperbole. He just said if this bill were in place before, you would not have had AIG, derivatives meltdown, subprime mortgage underwriting would not have gotten to the point where it did, Lehman resolved and on and on he talks fast. I think the only thing he left out was the GSEs.
How could any member of congress vote against this bill when it will solve all problems present and future?
Anyone who would refer to an Ayn Rand novel to support a political argument can probably be counted on to refer to the founder of Scientology to support his theological arguments.
Okay Downsouth, your last comment is flat out nonsense. That tells me you’ll simply say anything. I’m done with it.
Middyfeek,
Ayn Rand’s claim to fame was the same as that of the Nazi racial theorists, and that is that she took highly flawed, yet orthodox, evolutionary theory and applied it to the realm of economics and society. She thus spawned an entire cult of greed and selfishness that ran roughshod over American and British society for almost four decades.
Rand idolized individualism, and she was quite correct in her belief that selfish individuals in a society do indeed have an advantage over altruistic members. But what she failed to see is that greed and selfishness destroy group cohesion and solidarity. A society with a large number of self-serving individuals is a weak society. Altruism, because it enhances group cohesion and cooperation, is a trait most important to a well functioning, thriving society. But Rand abhorred altruism.
It should come as no surprise that the individualism that Rand so cherished was antithetical to the American Revolutionary spirit. “Before American common philosophy fell prey to Rousseauan notions (the French Revolutionary proposition) in these matters—and this did not happen prior to the nineteenth century—American faith was not at all based on a semi-religious trust in human nature, but on the contrary, on the possibility of checking human nature in its singularity by virtue of common bonds and mutual promises,” Hannah Arendt observes in On Revolution. The men who “ ‘bid a final adieu to Britain’…knew of the enormous potential that arises when men ‘mutually pledge to each other [their] lives, [their] Fortunes and their sacred Honour’.”
For more on the evolutionary “science” that underpinned Rand’s “secular creationism” or “academic creationism” is this article from New Scientist:
“ALTHOUGH a high standard of
morality gives but a slight or no
advantage to each individual man and
his children over the other men of the same
tribe… an advancement in the standard of
morality will certainly give an immense
advantage to one tribe over another.”
In this famous passage from The Descent
of Man, published in 1871, Charles Darwin
perceived a fundamental problem of social
life, and a possible solution. The problem is
that for a society to function, its members
must perform services for each other. Yet
members who behave “for the good of the
group” often put themselves at a disadvantage
compared with more selfish members of the
same group. If so, then how can altruism and
other prosocial behaviours evolve?
The solution, according to Darwin, is that
groups containing mostly altruists have a
decisive advantage over groups containing
mostly selfish individuals, even if selfish
individuals have the advantage over altruists
within each group.
Darwin’s insight would seem to provide
the basis for understanding the evolution
of social behaviour, a field known as
sociobiology. That’s not what happened,
however, as anyone familiar with the subject
knows. During the 1960s evolutionary
biologists, while agreeing with Darwin’s logic,
decided that between-group selection – the
evolutionary force favouring altruism – is
almost invariably weak compared with
within-group selection, the evolutionary force
favouring selfishness. As George C. Williams
put it in his 1966 book Adaptation and Natural
Selection, “group-related adaptations do not,
in fact, exist”.
…the consequences of regarding evolution as a
multilevel process, with higher-level selection
often overriding lower-level selection, are
profound. The 1960s consensus was
essentially a denial of the concept of society
as an organism. It claimed traits can evolve for
the good of the individual, but not for the
good of the group. Turning individuals into a
privileged level of the biological hierarchy was
a momentous event in the history of
evolutionary thought….
When Rabbi Hillel was asked to explain the
Torah in the time that he could stand on one
foot, he replied: “Do not do unto others that
which is repugnant to you. Everything else is
commentary.” In closing, we offer this
one-foot summary of sociobiology’s new
foundation: “Selfishness beats altruism
within groups. Altruistic groups beat selfish
groups. Everything else is commentary.”
http://evolution.binghamton.edu/dswilson/resources/publications_resources/New%20Scientist.pdf
Fine intelligent stuff sir.
Thx for the Link and all
@DownSouth sincere apology for getting in the middle of that argument -it looks like my comment was mistaken for yours -luv ya
The US Constitution set up a system of 3 branches of government with checks and balances that should allow time for deliberation and debate to slow down legal innovation and effectively prevent any takeover by another King George, Hitler, Castro, or Bush family and friends for that matter.
But purchase of our representatives in the government will permit anything. And we now have the inevitable result of that; only a sham of representative government. This setup; a government that CAN be bought is an invitation to the worst among us in a race to the bottom that they will INEVITABLY win, and have won.
The voters, American citizens, workers, middle class, call it what you will, are NOT responsible for this result; the result of a Congress purchased through the election system. The Supreme Court of the United States is responsible for our loss of representative government.
Two Supreme Court decisions stand out: the ruling that corporations are entitled to First Amendment rights like human citizens, and the blackmail of Rheinquist to achieve the appointment of George Bush after Republicans intentionally destroyed the prestige of the presidency under Clinton.
Unlimited money to pay for elections TRUMPS everything else; that’s your government –embezzled money from taxpayers and pensioners for lawmakers and cronies. Bush senior, former head of the CIA, who had to know that Rheinquist had a secret history of drug abuse, blackmailed him into taking the kind of case that the Supreme Court is not empowered to hear.
This is the kind of information that is typically used by power players for blackmail -it doesn’t take a rocket scientist or a conspiracy theorist to understand that.
Notice that the rating agencies have been getting away with their massive conspiratorial criminal defrauding of taxpayers and pensioners all over the world through their investment representatives with the protection of the CORPORATE First Amendment right to free speech.
Call the government we now have anything you like: fascist, communist, dictatorship, corporatist; they could care less.
“Two Supreme Court decisions stand out:”
The Renhquist stuff I do not know about. But quite germane to our present situation would be Valeo v. Buckley, that consecrated money/speech equivalence. This was the open door for Big Money to buy everything moving in DC.
“Secret English court seizes billions in assets from the mentally impaired”
http://joshfulton.blogspot.com/2009/10/secret-english-court-seizes-assets-of.html