Obama’s “Get Tough on Banks” Again Tries to Play the Public for Fools

Today, Obama said to the banking industry, “We want our money back and we’re going to get it.”

Has he forgotten that possession is nine-tenths of the law?

While Uncle Sam is normally able to defeat such long odds, all bets are off with our “Speak moderately and carry no stick” President. The fact that Obama is finally, after months of open intransigence by the big capital markets firms, saying a few mildly critical words is supposed to signal a change of posture. But he is clearly begging: “I’d urge you to cover the costs of the rescue not by sticking it to your shareholders or your customers or your citizens but by rolling back bonuses.”

Hint: urging gets you nowhere with this crowd.

Obama has been repeatedly praised for his soaring rhetoric, and I simply do not get it. It’s pretty easy to sound grand if you aren’t dispensing ideas that challenge the status quo. We are supposed to take his way-too-little-too-late finger shaking at the banksters seriously. By contrast, consider this section of FDR’s first inaugural address:

….the rulers of the exchange of mankind’s goods have failed, through their own stubbornness and their own incompetence, have admitted their failure, and abdicated. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men.

True they have tried, but their efforts have been cast in the pattern of an outworn tradition. Faced by failure of credit they have proposed only the lending of more money. Stripped of the lure of profit by which to induce our people to follow their false leadership, they have resorted to exhortations, pleading tearfully for restored confidence. They know only the rules of a generation of self-seekers. They have no vision, and when there is no vision the people perish.


Happiness lies not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort. The joy and moral stimulation of work no longer must be forgotten in the mad chase of evanescent profits. These dark days will be worth all they cost us if they teach us that our true destiny is not to be ministered unto but to minister to ourselves and to our fellow men.

Recognition of the falsity of material wealth as the standard of success goes hand in hand with the abandonment of the false belief that public office and high political position are to be valued only by the standards of pride of place and personal profit; and there must be an end to a conduct in banking and in business which too often has given to a sacred trust the likeness of callous and selfish wrongdoing.

Yves here. Admittedly, it is much easier telling Americans that the pursuit of lucre is a false god when most of the country is broke. But more is that FDR from the very outset set himself up as an opponent of rule by the banking classes. He depicts them as failures and calls them unscrupulous and selfish. By contrast, have were ever heard Obama even hint that bankers were less than ethical? Let’s see, last December, he called them “fat cats“! Ah yes, of course, everyone knows a cat will steal a sardine if you aren’t watching. Yeah, that Obama sure knows how to dress those bankers down!

As we discussed at greater length earlier this week, this new “get our money back” idea is pure three card Monte. Put the spotlight on the TARP so everyone will ignore all the other massive subsidies that the banks have gotten, continue to receive, and are abusing. Those who claim many banks have “paid back the TARP” are missing (more likely choosing to obfuscate) the point: the TARP calculus grossly understates of the gives and the gets here (although as we have said before and will say again, Obama’s focus on the TARP is pure political expediency).

The point of all these covert subsidies is to rebuild bank balance sheets through extra-Congressional processes. Post the hard fought battle to pass the TARP, and the fully deserved anger that dishonest process created, it would be hard to get another set of bank rescues passed, unless Team Obama had been willing to resolve the sickest ones (and they seem to react to hearing the “s” word, socialism, like a vampire reacts to garlic, so that was never going to happen).

Now in the S&L crisis, the US not only had funds allocated to winding down sick banks (and Congress was in fits over the allocation of working capital to the Resolution Trust Corporation) but it also had a stealth recapitalization program, namely Greenspan’s engineering of a very steep yield curve. As a result, banks sported much better earnings than anticipated and rebuilt their balance sheets. But this time, the Fed supports are far less covert (kinda hard to miss the ballooning of its balance sheet) and the banks are being pigs and undermining the purpose of this operation by skimming way too much off in employee pay. But it certainly appears no one has called the bankers into a private meeting and threatened them (and the regulators do hold the whip hand, even if they have been brainwashed into not recognizing that). Bernanke seems unable to see how his whole market manipulation program has been repurposed by the industry into welfare for the rich.

Merely paying back the TARP is grossly inadequate given the risks involved. As Roger Ehrenberg pointed out last summer:

The US taxpayer has been systematically looted out of hundreds of billions of dollars….Goldman Sachs is posting record earnings and will invariably be preparing to pay record bonuses, not nine months after the firm was in mortal danger? Whether anyone will admit it or not, without the AIG (read: Wall Street and European bank) bail-out and the FDIC issuance guarantees, neither Goldman nor any other bulge bracket firm lacking stable base of core deposits would be alive and breathing today.

Goldman….stood with the rest of Wall Street as a firm with longer-dated, less liquid assets funded with extremely short-dated liabilities….In exchange for giving the firm life (TARP, FDIC guarantees, synthetic bail-out via AIG, etc.), the US Treasury (and the US taxpayer by extension) got some warrants on $10 billion of TARP capital injected into the firm….. Lloyd Blankfein smartly paid the full $1.1 billion requested. He looked like a hero for doing so, a true US patriot repaying the US Government in full for its lifeline, thanking the US taxpayer in the process. $1.1 billion… $1.1 billion…Hmm…something doesn’t seem right. You know why it doesn’t seem right? BECAUSE THE US TREASURY MIS-PRICED THE FREAKING OPTION.

There is not a Wall Street derivatives trader on the planet that would have done the US Government deal on an arms-length basis. Nothing remotely close. Goldman’s equity could have done a digital, dis-continuous move towards zero if it couldn’t finance its balance sheet overnight. Remember Bear Stearns? Lehman Brothers? These things happened. Goldman, though clearly a stronger institution, was facing a crisis of confidence that pervaded the market. Lenders weren’t discriminating back in November 2008. If you didn’t have term credit, you certainly weren’t getting any new lines or getting any rolls, either. So what is the cost of an option to insure a $1 trillion balance sheet and hundreds of billions in off-balance sheet liabilities teetering on the brink? Let’s just say that it is a tad north of $1.1 billion in premium. And the $10 billion TARP figure? It’s a joke. Take into account the AIG payments, the FDIC guarantees and the value of the markets knowing that the US Government won’t let you go down under any circumstances. $1.1 billion in option premium? How about 20x that, perhaps more. But no, this is not the way it went down….

More important, despite the firms’ claims otherwise, >they are now effectively backstopped by the government, and they know it. They should be paying insurance premiums, NOW, hefty ones, for being beneficiaries of the “No more Lehmans” policy. But there is no desire for anything remotely resembling a full accounting from the crew in the Administration.

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  1. attempter


    I agree with that. I had always heard what a great speaker he was, but the first time I actually watched one of his speeches was his health “reform” address to Congress (because I was writing a blog post on it).

    Aside from the despicable content, the emptiness and the lies, what impressed me was what a poor speaker he was. After the logical end of the speech he rambled on disconnectedly for another ten minutes. I said, man is this guy a boor.

    But every time I see a news bite from him it’s the same combination of arrogant yet wimpy superciliousness. He really is the same sleazy windbag everybody who ever knew him says he was going back to law school.

    He radiates what a kiss-up, kick-down type he is (the most vile and contemptible hominid type). He’s basically there to bow and scrape before his corporate masters while lecturing down to the people about how stupid and childish they are. How they should simply learn to accept and embrace their tightening bonds of slavery.

    I never thought in a million years I’d be missing Bush’s smirk by comparison.

    1. DownSouth


      You say: “I never thought in a million years I’d be missing Bush’s smirk by comparison.”

      After reading Yves’ post, I was thinking along those same lines. Bush was what he was, and being the scion of power and privilege, relished screwing the little guy, and hailed from a party that embraced that philosophy.

      But with Obama, on top of the sin of bending the little guy over and giving him a good reaming out, you have the additional sins of hypocrisy and betrayal. I believe that, and especially if we get a second leg down in this economic crisis, Obama will end up being a much more hated and despised figure than Bush.

      But politically this sets up a very dicey situation. It gives an opening to what Hannah Arendt called “professional revolutionaries,” who are always waiting in the wings, like vultures ready to leap when there is a loss of authority in the powers that be. As she explains: “The part of the professional revolutionists usually consists not in making a revolution but in rising to power after it has broken out…”

      While Arendt aimed most of her criticism at professional revolutionaries of the Marxist stripe, because almost all professional revolutionaries of the 19th and 20th centuries were indeed Marxists, professional revolutionaries also exist on the right. And I believe this is where most of the danger to our democratic form of government currently exists today—from right-wing populism. Left-wing populism, already on life-support, seems to have been given the coup de grâce by Obama and the Democratic Party.

      We had a poignant reminder of the dangers of right-wing populism today from Pat Robertson, who lashed out at Haiti, claiming it is cursed because it made a pact with the devil. But as a commenter on a panel put together by CNN points out, Robertson has a secular hard-right twin in the likes of Rush Limbaugh. He summed up guys like Limbaugh this way: “They have the power of a majority with the pity of a minority.”

      Reinhold Niebuhr, writing in “The Children of Light and the Children of Darkness,” describes one instance in the 20th century where hard-right professional revolutionaries did prevail:

      The success of the Nazi diplomacy and propaganda in claiming the poor in democratic civilization as their allies against the “plutocrats” in one moment, and in the next seeking to ally the privileged classes in their battle against “communism,” is a nice indication of the part which the civil war in democratic civilization played in allowing barbarism to come so near to triumph over civilization.

      But in a way, that kind of describes Obama, does it not?

      1. Doug Terpstra

        Great video on Robertson, “God’s PR nightmare”, a good soldier in the Armageddon Lobby.

        Rush Limbaugh also weighed in on Haiti, saying Obama would use the crisis to burnish his image with light- and dark-skinned blacks.


        These guys are Obama’s best reelection insurance. Do you suppose their supporting role is conscious?

        1. DownSouth

          I don’t know, Doug, I certainly don’t believe it lies outside the realm of possibility. One of the greatest expressions concerning life’s dilemma was written by Cornel West:

          My fundamental problem with Du Bois is his inadequate grasp of the tragicomic sense of life- a refusal candidly to confront the sheer absurdity of the human condition. This tragicomic sense- tragicomic rather than simply “tragic,” because even ultimate purpose and objective order are called into question-propels us toward suicide or madness unless we are buffered by ritual, cushioned by community, or sustained by art. Du Bois’s inability to immerse himself in black everyday life precluded his access to the distinctive black tragicomic sense and black encounter with the absurd. He certainly saw, analyzed, and empathized with black sadness, sorrow, and suffering. But he didn’t feel it in his bones deeply enough, nor was he intellectually open enough to position himself alongside the sorrowful, suffering, yet striving ordinary black folk. Instead, his own personal and intellectual distance lifted him above them even as he addressed their plight in his progressive writings. Du Bois was never alienated by black people….But there seemed to be something in him that alienated ordinary black people. In short, he was reluctant to learn fundamental lessons about life- and about himself- from them. Such lessons would have required that he – at least momentarily- believe that they were or might be as wise, insightful and ‘advanced’ as he; and this he could not do.

          –Cornel West, The Future of the Race

    2. Vinny G.

      What do you expect? He’s a Chicago politician, isn’t he? He graduated valedictorian from the Cook Country School of Corrupt Politics…


      1. craazyman

        Do you mean Harvard? I thought that was Yale.

        Ho ha ha ho.

        As I overheard the two bag ladies say riding on the Saturday bus in Brooklyn, chewing with their hairy and psychotic jaws between their damnation of a couple neighborhood toughs, “One of um lies and thee otha swaryes, one of um lies and the otha swaryers . . , “

  2. Stevie b.

    Yves – it’s not just the public who are being played for fools. Most of the media here in the UK seem to think it’s a good idea and even Vince Cable – who is everyone’s favorite for chancellor no matter which party wins the election – even he seems to think that Obama is on the right lines, so what hope is there for us ordinary mortals, even if we think we actually might know better?

  3. bob

    “all bets are off with our “Speak moderately and carry no stick” President”

    Nominated for quote of the year.

  4. MarcoPolo

    Goldman puts 18 $Billion in his pocket doing God’s work and it’s simple. We are eminently prepared to do that deal.  The money is there, the accounts are active, the contracts are signed , the courts sanctify it, the transactions can be completed in miliseconds.  And a 7.0 earthquake hits Haiti. Haiti!  Why Haiti?  Of all places?  The poorest place in the hemisphere – by a lot.  Comparable only with places like Burkina Faso.  9mm people, 2 mm in the capital Port au Prince, and where does the earthquaket hit?  Right.  50,000 dead. Maybe more. Nobody has any idea.  The entire health care infrastructure is destroyed. No hospitals.  Medecins sans Frontieres is doing surgeries in tents  There are doubts about the capacity to unload supplies even if they were available  Many didn’t have clean drinking water even before the earthquake.  Why Haiti?  Or Burma?   Who could be more vulnerable?  Are we to shrug our shoulders yet again?  There is a lesson here which should not be lost on us.  Our priorities are wrong.  Goldman may have to wait.  I’m quite OK with bringing Hugo Chavez up here to be Bank Czar. Liquidate that bunch and use the money for something else. But Haiti needs our help this morning.  I hope you will all do what you can do.    

    1. DownSouth

      Haven’t you gotten the memo from the right-wing Christians? Haiti is being punished because it’s not doing God’s work:

      Pat Robertson: Haiti ‘Cursed’ By ‘Pact To The Devil’ (VIDEO)

      See how simple it is to explain all these things!

      Remember Yves’ post about the family that was struggling to make its house payment and wrote her asking for advice, and all the hateful remarks that spawned from Pat Robertson wannabes?

      Well here you have the same phenomenon, just a little bit more unvarnished.

          1. DownSouth

            Well you see, it’s the new Eleventh Commandment, revealed by God to Pat Robertson, Rush Limbaugh and the founders of the Tea Party Express, and reads as follows:

            Pick thyself up by thy bootstraps, and complain not, for this is thy just reward. If bad things befall thee, it is because thou hast done bad things. Hear this and obey my command, unless thou art a TBTF banker, and have earned my everlasting grace, having been unfailing in doing my work.

          2. Zephyrum

            They say God helps those who help themselves. And the TBTF bankers have certainly helped themselves…to everything they could get their hands on.

      1. jerry matson

        Unimaginable suffering in Haiti, and your main concern is making political hay off by pointing out idiotic statements by Pat Robertson? (It’s not just you – it was the second lead story on Rachel Maddow’s show, an attempt to illustrate that anyone who isn’t on the Left can only be a blathering fool. My suggestion for anyone wanting to play politics with this is to open your checkbook, send money to Doctors Without Borders, and then close your mouth. That goes for Limbaugh, Maddow, Olbermann, and YOU.

        1. DownSouth

          So let me get this straight. It’s OK for Robertson to use 50,000 deaths and unimaginable human suffering as a political football, but when someone challenges him on it, that’s “making political hay.”

          But much importantly, your underlying assumption is entirely false, for Robertson’s statements are far from being “idiotic.” They are part and parcel of a carefully calculated rhetorical offensive.

          Dictionary: Shock Troops
          Soldiers specially chosen, trained, and armed to lead an attack.
          [Translation of German Stosstruppen : Stoss, shock + Truppen, pl. of Truppe, troop.]

          Robertson uses statements like these to push deep into the enemy’s defense, with ‘infantry accompanying batteries’ following them and ‘assault blocks’—battalion-sized teams of infantry, mortars, and machine guns—hard on their heels to exploit success. In other words, he makes it safe for and emboldens less daring foot soldiers, who fill in the new territory he opens up with his storm trooping.

          People are not objectionable to the cost of lending a helping hand to those in need. And Robertson knows this. He also knows that what people do object to is if their money is going to people who don’t deserve it, which this study amply demonstrates:

          By more than four to one (65% to 14%), Americans say the most upsetting thing about welfare is that ‘‘it encourages people to adopt the wrong lifestyle and values,’’ not that ‘‘it costs too much tax money….’’

          The cost, apparently, is not the problem. In focus groups: Participants invariably dismissed arguments about the limited financial costs of welfare in almost derisive terms as irrelevant and beside the point.

          And the authors of the study conclude:

          There is substantial support for generosity toward the less well off as long as they are ‘‘deserving’’ poor, who have provided or tried to provide a quid pro quo and are in good standing.

          Of course the people who Robertson represents could care less about these moral distinctions and subtleties. What they care about is money. But the decision-making process of the general public doesn’t work that way, regardless of what orthodox economists–another group of Wall Street whores–say. So Robertson’s job is to make those receiving a helping hand “undeserving,” and in a big and splashy way, so others feel comfortable making similar statements, even if they’re considerably toned down.

    2. Skippy

      The devil was/is American corpoxuray, he bemoans him self (Pat Robertson).

      Goggle map or use your favorite global app and see the landscape in contrast between the Dominican Republic and Haiti. Haiti’s elites sold their souls and natural weatlh to American corperations a long time ago.

      1. MarcoPolo

        Sloppy, you may be right about corporate complicity in Haiti’s problems, but I remember the Duvalets an Am. Corporates had nothing on them. But it’s not about who’s at fault. Who caused the earthquake? It’s about what is. And it’s bad. We can either shrug our shoulders or bend our shoulders to it.

        1. Doug Terpstra

          Hey Macro, it’s Skippy, not Sloppy :-)

          Skippy’s right, and the Duvaliers WERE the corporates’ junkyard dogs. Slavery in Haiti simply morphed into a (slightly) less overt form.

          CommonDreams.org has an exceptional piece: “Haitian Earthquake: Made in the USA —Why the Blood Is on Our Hands” by Ted Rall. It’s a concise history of shameful American neocolonial imperialism in Haiti:


          Many site commenters note that Rahm Emanuel’s dictum on the value of crises will become Obama’s lever for further exploitation of Haitian seatshops. As the ’05 tsunami revealed, natural disasters and economic meltdowns are mercilessly exploited by the lords of “Disaster Capitalism” following the formula in Naomi Klein’s “Shock Doctrine: the Rise of Disaster Capitalism”, wherein every crisis is used by the masters of the universe to ratchet the choke collar of predatory power.

        2. Skippy

          You are correct in saying the corporates had nothing on them as they gave as good as they received, even with their own bought and payed for indigenous elites. I point out the demolishing and booting out of all family’s mansions and huts illegally built in national forests and the subsidizing of LPG gas and distribution of gas stove tops for cooking, saving the timber reserves from charcoal manufacturing or export furniture. Also negating the soil run off from slash and burn agriculture down steams and rivers ultimately choking the fragile reef fish nursery’s.

          So to boil it down, one nation exploits their resources for quick profit which lands in the hands of a few local elites (mostly drained off to America), where the other conserves for future societal needs.

          Too me this is a repeat of Cuba, where in Castro is invited to DC and read the right act, and when its realized he is not hat in hand, war is declared upon. You did know he came to hammer out a deal to coexist, but would not 叩頭 to his masters and as such was put on their hit list.

          You are also correct in your assertion that shoulders must be applied to the task, regardless of past discrepancy’s on our part with the caveat that pro activity is cheaper and better than reactivity. Kinda like the math used to justify airline safety standards, corporate bottom line trumps societal bottom line as former is traded upon in the markets and the latter is not.

          Skippy…Marco Polo your affectionate usage of Sloppy is noted…although if this was an attempt at personal diminish-ment I would inform you that guns have been pointed in my face and triggers pulled…you’ll have to lift your game.

          1. fluffer

            How does you love of facials bolster your argument exactly?
            “Guns” pointed and “triggers pulled” indeed.

          2. Skippy

            That was with regards to MarcoPolos sloppy crack, love is your insertion. And the first incident was a drunken fellow solider that wanted 40 bucks to get more grog, when I (asleep in bed moments before) refused produced an unsecured personal weapon (.32 semi) and dry fired from 2ft my face. I let him off light and he was reassigned as a quartermasters asst, as where I could have sent him before a Summary Court Marshal and years in Leavenworth followed by a BCD discharge. The rest were loaded and on the job incidents of which the owner perished.

            I have stated before on this blog that I have worked in troubled places during the hight of tragedy and whilst everyone is focused on their television sets gaping at the carnage (or secretly cheering that they got theirs) that actions are set into motion for the future benefit of the billionaires club, under the guise of unencumbered assistance.

            Back to the real issue, my argument is, that the Pat Robertsons of this world should immediately suffer their own derisions as DownSouth points out their place in the hegemony. Secondly the pillaging of 3rd world countries for the billionaire club magnifies the tragedy which is then used to further in slave them. Got that, kick the people when their at their most vulnerable and call it a gift. Kinda like citizens of the US now, eh.

            Further more Marcopolo was ill/uninformed to the history involving Hispaniola and has decided to let this lay as is, where as your involvement is purely inflammatory. Please enlighten me to your position regarding the last hundred years of US policy in this region.

            Skippy…see tonights links for more…best to you and yours.

  5. Robespierre

    Obama will never turn against his real bosses. He sold himself to these people and he’ll never bite the hand that feeds him. Biggest disappointment ever.

  6. eh

    I don’t give a damn what banks pay their employees. And neither should you Yves. It’s the behavior of the government (and the Fed) that’s the problem.

    Kabuki nonsense.

    1. Robespierre

      I beg to differ. Last time I check the briber is as guilty as the bribed (or the campaign contributor is as guilty as the beneficiary if you will)

    2. alex

      “eh” is basically right. While some focus on banksters is useful, the main focus should be on the government. Sure the banksters were irresponsible and sociopathic, but so what? People like that will always fester when allowed, and they’re not directly answerable to the public. By contrast the government is supposed to be, but dollars count for more than votes.

      As for Robespierre’s point that “the briber is as guilty as the bribed”, the problem is that the bribery is mostly legal. The fact that it’s legal is the real crime (in the ethical and moral sense). Only the government can change that. Until that happens, we won’t return to a representative system of government.

  7. sandy

    it is the behavior of the government that is the problem, and where is their punishment?

    that still doesn’t excuse the investment banks being pigs and getting away with it.

    1. alex

      No it doesn’t excuse it, and some outrage is both appropriate and useful. Focusing on it too much though just draws attention from Clinton, Rubin, Greenspan, Bush, Paulson, Bernanke, Obama, Summers, Geithner, et al.

      The real purpose of Obama’s and other politicians manufactured outrage at the banksters is to distract from their own culpability.

      1. Anonymous Jones

        I like both comments by alex. This appears to me less about excusing others’ conduct than about asserting our rights. This is *our* fault. Until the dispossessed collectively sacrifice the time, money and effort to reform the system, we are all to blame for the system. Jumping up and down and whining “you malevolent banksters shouldn’t be doing this, you just shouldn’t” is of no use. Spending five minutes every few years in the voting booth is not going to cut it either. And hoping we lived in a world in which the powerful are benevolent is totally and utterly useless. We obviously don’t live in such a world. Take reality for what it is. You have to *fight* to make the world the way you want it. You have to *fight* to stop bullies from taking advantage of you. Casting asperions on the bully is pointless. You have to hit him in the mouth.

  8. Patrick

    Hopefully the lesson that will still be learned–“no plan was the best plan”. Bush should have let the system implode with no bailouts.

    Instead the interventionists took over and they are now reaping what they sowed. This continued jumping up and down in their playpens is getting old.

    And please spare me the canard that doing nothing would have been worse. You can not know that. It’s just more Keynesian claptrap spruced up by the Krugs and Stiglitz’s of the world.

    1. wunsacon

      >> You can not know that. It’s just more Keynesian claptrap

      Every bank failing would not have been worse? Doing “nothing” in response to that would not have been worse?

      Maybe “you” can not know that. But, I believe I do. There are not enough bankruptcy judges and lawyers to handle the deluge that was coming.

      That does NOT mean that the only way to handle this was by bailing out the equity holders and bond holders at every account. Like my beef with the GOP (and now the Dems) over the war against terrorists, my beef with the GOP and the Dems is not their goal but their plan. Instead, of paying 100 cents on the dollar, they should have nationalized these suckers, fired all the top brass, and given big haircuts to shareholders, bondholders, and account holders above certain limits.

      1. spectator

        That “every bank would fail” is mere hyperbole. And there is FDIC insurance to protect those that need it most. The rest needed to be taught a lesson on trusting the financial industry.

        This kind of inability to let the system work is what leads us down the road to hell. Moral hazard is cheered on by the timid, and the misguided who are unable to let society face consequences.

      2. Patrick

        I have to respectfully disagree. “Every bank failing” is a false construct spread by the interventionists. You/we cannot know how many banks would have failed. What we can be certain of is there would have been massive write downs and a self preservation instinct would have taken over.

        The derivatives market would have imploded. The players would have been forced to settle their positions for better or worse.

        What we surely know is that the interventionists knew that the minute they intervened it would be a clusterf’k. Yet they still proceeded. Why? Because it was not their money. Now they are all making excuses that it was everyone else’s fault. History will prove it was the historical ignorance and naivete of the interventionists that has created this depression led by their court jesters, Krugman and Stiglitz.

        1. alex

          Patrick: “History will prove it was the historical ignorance and naivete of the interventionists that has created this depression led by their court jesters, Krugman and Stiglitz.”

          Neither Krugman nor Stiglitz (or for that matter wunsacon) advocated the approach that’s been taken. As wunsacon pointed out, “temporary nationalization” (more properly called receivership) wipes out the stock holders, and should give haircuts to the bond holders and fire the top management. It’s those actions that avoid the moral hazard. It also avoids the chaos that ensues with the uncontrolled meltdown approach. That needlessly punishes people who had no involvement with the banks that fail.

          By contrast Team Bush and now Team Obama have taken the Japanese approach (so widely, and correctly, denounced by Americans) of endlessly propping up banks that are insolvent (or would have been without massive taxpayer aid). That not only creates the moral hazard that you rightly decry, but leaves the economy in endless doldrums (except for the banksters of course).

  9. Vinny G.


    Was he on his knees while saying that?…lol


  10. Josh Greene

    You guys just don’t get it. GReenspan, BErnanke, Frank, Dodd. Those are the criminals that got us into this mess. The bankers (while greedy) were simply not the problem. IN fact THE AMERICAN PEOPLE are as a whole more responsible then anyone else. We all participated in this fraud. We all lived above ourt means. Why not tax the millions of Americans who lied on their loans etc. Stop the witch hunt and go after those who REALLY caused the problem. and that starts with BErnanke and GReenspan first and foremost.

    1. Vinny G.

      What are you saying, my friend? Do you want to put Joe Sixpack in prison for having bought a plasma screen he could not afford just because he wanted to watch his team in higher definition? You can’t be serious.


    2. Robespierre

      Joe sixpack never paid its congressman to change the regulations so they cold rob the country…

    3. wunsacon

      >> The bankers (while greedy) were simply not the problem.

      “The” or “a”? You wrote “the”. Probably because you couldn’t knowingly write “a”. But, the rest of your post is written as though you wrote “a”.

      >> We all lived above ourt means.

      Uh, this responsible, workaholic renter here says “no”.

      >> Why not tax the millions of Americans who lied on their loans etc.

      I would if I could. But, it’s not practical. But, it is practical to let their loans fail and their credit to be ruined for a few years.


      So, the American people as a whole are more responsible than anyone else but we should go after Bernanke and Greenspan first and foremost? Not sure what you mean.

    4. Robin

      Who here would like to give Josh a lesson in “30 Years of Wage Stagnation”? Maybe you ought to go school yourself there Josh, on just how and why we ended up as a nation of debtors. Try Google, N’k?

    5. Robin


  11. Francois T

    You obviously do not think that Barry Ritholz’s idea has any chance of seeing the light of day in DC.


    Mind you, I’m not holding my breath.

    Barry’s idea in a nutshell:

    And, here’s the interesting part: It could potentially do more than reduce the deficit — if it goes far enough, it could actually solve the TBTF problem. Exempt small regional banks with under $25 billion in deposits. Make the tax progressive so it become increasingly larger as deposits become greater. $25-$50 billion in deposits is one fee (Let’s say 0.1%, that’s $25 million on $25 billion in assets). Have it scale to the point where its punitive — 1% on a trillion dollars in deposits.

    The goal here isn’t to raise money — its to force the TBTF banks to become smaller — to break up the Citigroups and the Bank of Americas. This tax will restore competition to the banking industry.

  12. wally

    Politicians who promise – but do not deliver – don’t stay around long. Obama is highly likely to be a one-term president. His strongest card at this point is the total idiocy of the most likely opposing candidates. The risk to us is that one of those idiots may be our next president.

  13. mitchw

    Trust me, I’m no sofisticate, and I’m steamed about this TARP slight of hand. All the hidden supports for the banks via FDIC and the Fed, and the heinous bonuses those creeps want, are perfectly obvious to anyone paying attention.

  14. gotgold

    In support of Obama and sounding like an apologist I don’t think he understands these financial boondoggles beyond TARP. He is being irresponsible for abdicating monetary authority to Geithner. History will treat him a worse idiot than Bush for that.

    He needs a Paul O’Neil – Someone honest and willing to tell him everything and not use him to propagate their agenda.

    1. Robespierre

      He has Volker and his is not paying attention to him. But I agree with you you are being an apologist .)

      1. Ishmael

        Gotgold — I did not vote for Obama for the exact reason you outlined — the man is an empty suit with no experience at anything except sucking off of the public teat. There is his whole resume.

        Before any one gets too upset and start saying he was better for McCain, I did not vote for him either.

        In summary, I believed the choice was made for us. Either one would do and unlike a monkey who goes and pulls the lever to get a dried piece of dog food I refused to participate. Now some might say that I did my democratic duty, well please note that I do not believe in democratic government. Out country was originally set up as a republic. It passed through the democratic state where the many can steal from the few on its way to an oligarchy.

        Yves — an excellent post.

        1. alex


          Part of a republic is voting for candidates, so you failed in your duty there. Don’t like McSame or O’Cain? At least make a protest vote.

          “It passed through the democratic state where the many can steal from the few”

          When were the many busy stealing from the few?

    2. wunsacon

      >> History will treat him a worse idiot than Bush for that.

      Obama voted for TARP and Bush signed it. How could one be “worse” than the other?

      The list of previous dumb decisions that lead to TARP is long and involves both parties but most directly involves the GOP and Bush in the 8 years up to the meltdown. Who’s history book will treat Obama as a worse idiot than Bush?

  15. Steve Roberts

    This will all blow over as soon as the spring political donations start arriving in the mail from the banking executives.

  16. Thomas Barton,JD

    Yves, can you amplify with JPmorgan’s announced Q4 profit how your paragraph on the S&L crisis and Ehrenberg thoughts relate in real dollar terms to the mismatch between capital needs and the bonus depletion. Do you have the capability on your site for colored graphic pie chart ? Cap Weinberger said the only way he could get Reagan’s attention was with large colorful pie charts. We fancy ourselves sophisticates in discussing this debacle but other sites could pick up a post on how JPMorgan et al. could better utilize their government-gotten gains. Also FTalphaville has an article on Greek CDS swaps inverting. Could the TBTF crowd see this coming soon and so are hoarding every dime for themselves in anticipation of a unstoppable meltdown of their insulated but not absolutely invulnerable Helicopter Ben built ramparts ?

  17. Jim in MN

    I have noted this before but not for a while. In the 1930s it took government about three years to come to grips with the fact that their initial policies didn’t work. They beefed up the new Reconstruction Finance Corporation and among other things inserted Federal agent into bank management positions, in order to begin to get credit and lending back in order.

    The private sector banking industry is completely rational in simply going on strike. This is a defensive response to the coming series of meteor strikes likely to impact their balance sheets on top of those already there.

    This lending strike, seen especially from the perspective of small business, is like the failure of thousands of smaller banks in the 1930s. This characterizes the ‘Slump’ phase of the Great Depression and takes a couple of years to really collapse the economy and social systems/expectations. Our cadre of so-called economists and policy wonks clearly have never bothered to study this history, instead obsessing with the percieved glory and power of the Depression-era stimulus programs. Basically obvious and only semi-relevant stuff compared to a bankers’ strike.

    The bankers’ strike needs to be seen as a clear and present danger to our national security, on a par with a railroad strike. It simply must be broken by force. It would be no more trouble than a large drug raid.

    The fact that there is no analysis, and that options that were critical policy choices in the 1933-34 period are seemingly unheard of, shows clearly that we are only one year into a several year process of screwing the pooch. As a direct result, the crisis will be much more severe and protracted. The quarter million in fresh debt placed on my young children is barely a start, and for what?

    May God have mercy upon our Nation. I only hope we can maintain the Republic when this unfolds to its full extent.

  18. TC

    Nice work. At this point I’d rather be a snowball in hell than the President’s “Financial Crisis Responsibility Tax” proposal before the U.S. Senate.

    Bless you, too, for quoting FDR’s first inaugural speech. It is quite a contrast comparing the man who saved the U.S. banking system in a matter of a week with “change you can believe in” whose accomplishment in a year has been a permanent ban on naked short selling. Pathetic.

  19. DaveInDenver

    Great commentary Yves, and dead on the money. Here’s what’s going on with the supposed CFTC regulation of futures positions, especially w/regard to metals:

    “In fact, my new expectation is that any CFTC regulation in the metals will make it more difficult for speculators to trade and make it even easier for the big banks to rape and pillage the gold and silver paper markets.”


  20. jdmckay

    Thanks for FDR quote… it was appropriate for his time, and for ours now.

    I spoke loud and clear for just that to everyone I knew beginning before election, after BO nominated Geithner etc etc…. mostly fell on deaf ears. I was regular on EW’s blog, pretty much got run out of there for my comments thusly.

    Whatever BO’s lack of courage/wisdom/???, worse problem IMO is utter lack of understanding, ahead of the curve, buy large body of electorate. As long as public is willing to be lead by the nose, they will be led by the nose.

    BO had enormous opportunity to really effect “change”, given US’ utter disenchantment w/everything Bush.

    He’s blown that opportunity completely. I share your disgust/frustration, and really don’t have any “hope” of solution from him.

    In past, I never considered voting 3rd party as it seemed like only a protest vote that would only serve to swing things Bush’s way. At this point, I’ve changed my mind: if a 3rd party emerged, built on what’s really needed (or as Howard Dean said: the “Democratic wing of the Democratic party”), I’d run w/it.

    And honestly, if Dean went his own way and tried to start 3rd party, I’d put profession on hold and bust my butt to work w/him.

  21. Doug Terpstra

    “…saying a few mildly critical words is supposed to signal a change of posture.”

    Pathetically, he’s done this before. Following his 60-minutes speech about “fat cat bankers”, banksters from Citi, Morgan, and Goldman did’t even bother to show up for a face to face with the President. Since he’s been copiously bribed, they simply phoned in their scripted lines—even ad libbing, “see what happens when we’re shamed into using public transport?”

    And that was a repeat of the Sept 14 Lehman speech on Wall Street. Ives Smith wrote on December 14:

    “The industry signaled its complete disrespect for Obama when not a single Wall Street chief executive attended Obama’s anniversary of Lehman speech. They know they are in the driver’s seat because Obama already ceded too much and is now in no position to claw his way back. Had he acted boldly starting January 20, things could be very different, but he now lacks the strategic position to have any impact, and he never had the nerve to begin with.”

  22. sherparick1

    Ah the internet! It allows me to discover so many folks who have obtained the ability to read minds.

    Yves and so many here claim that Obama has “betrayed” the platform he ran on. Again, go back and read that platform. He was the right on to Clinton and the other Democrats on health care and economic policy, as Paul Krugman points out. He comes from Hyde Park and is an adjunct law professor on the same faculty and Law and Economics gurus, Judges Richard Posner and Frank Easterbrook. Yes, he at time used some populist rhetoric, but nothing about Obama was populist, in fact anti-populist. He won because used his anti-Iraq war from the beginning stance as his creed with the long time anti-war wing of the Democratic party which was anti-Clinton; he captured the New Democratic/Neoliberal faction of upper middle and upper class Democrats who, while very pro-choice and socially liberal, had internalized neo-classical economics (market good/government bad aka as New Deal bad & archaic/tax cuts and deregulation good) a faction that had been pioneered as reliable core vote by Gary Hart, Paul Tsongas, and Phil Bradley in earlier Democratic primary contests, and added to that the alleigance of Black voters intoxicated at the idea of a Black nominee, or mirable dictu, a Black American President. And it is and was a miracle that I for one will always regard as one of the great achievements in American history, no matter his other failures.

    Is Obama still captured by the Rubin clique? Yes, but of course so would almost any Democrat. Even Paul Krugman was speaking highly of the achievements of Bill Clinton’s economic team as late as December 2007. Also, Obama in a sense has took over at a earlier stage than FDR did. Again, I would recommend reading Schlesinger’s “The Crisis of the Old Order,” the first volume of his “The Age of Roosevelt” to see how FDR’s views changed from 1930 through 1933 as the Depression deepened. The FDR who came to power in March 1933 held very different views than the man had in March of 1931. Further, the great reforms, such as the SEC and Glass-Stegall, did not occur until 1934 and 1935.

    Finally, you all seem to have an idea of Presidential omnipotence on domestic policy that does not exist. One needs 218 votes to pass a law in the House and with the way Senate is currently run, at least for liberal proposals, 60 votes in the Senate. 41 senators from states representing just 12% of the population can block legislation. Please tell me gentle souls how you would get your 218 House votes and 60 Senate votes for all your reform proposals.

    Geithner, Summers, and Bernanke are not so much corrupt as they are prisoners of the groupthink of the last 30 years. As the young graduate student who signs himself “Thorstein Veblen” and runs the FireLarrySummersNow.com, Larry, probably because of family dynamics (uncles Ken Arrow and Paul Samuelson being the greatest liberal, Keynsian economists of the post WWII prosperity), essentially shares the same views as Greg Mankiw, as taught to them both by Martin Feldstein. Feldstein was Chairman of Reagan’s counsel of economic advisors and Mankiw held the same position for George Bush (and was followed by Ben Bernanke after he left – I think we have a theme here). I once had hopes that Summers had discovered the errors of his way back in 2008, but that hope is now crushed.

    Why did Obama choose them? Well, because he himself is a Harvard man and a member of the elite, he shares a lot of the group think of the last 30 years. He has not (“yet”) disenthralled himself from the tired dogmas of the past, particularly the dogmas of “freshwater” economics. If his Presidency is still going to succeed, he will have to disenthrall himself. Ultimately, I think he is a smart enough politician that he will.

    1. Hugh

      There seems to be a contradiction in your argument. You say that we all should have known that not only was Obama not populist but that he was anti-populist but at the end of your comment you say that you think that Obama is smart enough to disenthrall himself from his economics team. Aren’t you doing the same thing that you accuse others of doing? If everyone should have paid close (and apparently selective) attention to what Obama said (i.e. forgetting “Yes, we can!” and “Change we can believe in!”) and known he was anti-populist, shouldn’t you also have been paying close attention to what he has been saying (and doing) and understand that there is no basis for the contention that he will disenthrall himself from what you typify as freshwater economics and what I would describe as ordinary barnyard kleptocratic corporatism?

    2. emca

      Are you saying Mr. Change will change?

      I suppose reformation of the sinner is always possible if the sinner acknowledges his (or her) sins. Cynically, I don’t see it here, but who does not, in land of the free, believe in angels?

      More to the point, the man will always do what is necessary to keep the faith, and if a few words suffice, so be it.

      Lately I’ve been cool on change anyway.

    3. Robespierre

      And you say:

      True, but you need no votes to tell the FBI, SEC and IRS to look for wrong doing of the firms that failed. Or are you arguing that no laws were broken on the way up of the housing bubble? Last I checked the S&L crises “produced” several criminal sentences. This crises (multiple orders of magnitude bigger) has produced exactly “0” and what is worst “0” investigations.

      1. alex

        Robespierre: “Last I checked the S&L crises ‘produced’ several criminal sentences.”

        Actually it was over a thousand. I know I’ve repeatedly said that perp walks aren’t the most important thing, and I stand by that, but I’ve got to admit that zero vs. a thousand is mighty suspicious.

    4. Yves Smith Post author

      Hank Paulson put Fannie and Freddie into “conservatorship” when you could make a pretty sound case for that re Freddie, not for Fannie. So if Paulson could take a not bankrupt financial institution into conservatorship, there is no reason Obama could not have, save balls. Citi and BofA were far more clearly broke than Fannie and Freddie as of Sept. 08.

      Geither and Bernanke have expended considerable creativity in getting funding for banks with NO congressional approval. The same skills and similar approaches could have been used to create extra-congressional funding for bank recapitalizations. But no, we can only run around the constitution to benefit the banksters, not to do what is needed to fix the financial system and the economy.

  23. Vinny G.

    If I were a cartoonist, I’d draw this:

    Picture a homeless Obama panhandling on the corner of Wall Street and Broad. The caption reads: “Homeless nation. Will work for the return of some TARP money.”


    1. Robespierre

      Myself the cartoon would be the Lernaean Hydra each head will be the head of one of the major banks (GS, JPM, BoA etc). The serpent would be protected by the Hellhounds withe the faces of Obama, Timy, Paulson etc. It will make a nice political cartoon

  24. Hugh

    It’s an election year and in election years the occasional bone (OK, more of a virtual bone) has to be thrown to the rubes. The odds are it will come to nothing, but even if enacted, it would amount to next to nothing. $120 billion sounds like a lot but I believe it is to be spread over ten years. So let’s see the banks get trillions and an Obama tax would have them pay back $12 billion a year. Where will they find this money? In their petty cash?

    As for the election, a vote cast for either a Democrat or a Republican is a vote wasted and an endorsement of the current bipartisan kleptocracy.

  25. Lazy Ichi

    Oh come on now, Yves.

    The public IS nothing but a bunch of fools. They may know how to read and write (and that is questionable), but they can’t think for themselves.

    How else can you explain Bush getting a first term and then a second term to boot.

    The reality is the public is a bunch of lazy, contented serfs. The bankers realized this fact a long time ago and can go about robbing them blind without any guilt at all.

    The modern day Pecora Commission is all for show; nothing will come of it. It’s all “feel good” baby. And then things can go back to the way they were.

    1. DownSouth

      Sounds like you fancy yourself a modern-day H.L. Mencken, the one who coined such well-known jewels such as this one:

      No one in this world has ever lost money by underestimating the intelligence of the great masses of the plain people. Nor has anyone ever lost public office thereby.

      Many similar quotes by Mencken excoriating the common man can be found here:

      From his command post at the American Mercury magazine, Mencken blasted away at the hoi polloi, heaping scorn upon the factory worker or the sharecropper. That was during the Roaring Twenties, a decade almost identical in economic, social and political climate to that of the last ten years.

      But by 1933, Mencken resigned his editorship. As Frederick Lewis Allen put it, the shock of the depression had a profound effect on the nation, and “the new highbrows were dismissing him airily as a back number.”

      I think a legitimate case can be made that there’s plenty of blame to go around. But you, like Mencken, sound like a person with an axe to grind.

  26. Bob Morris


    That’s part of it. But something else is happening too.

    I find it inexplicable that the Marxist left (who never had much use for Obama in the first place) is almost completely absent from doing anything in the current financial crisis, a crisis they’ve waited for decades to happen too. These are the same folks who launched major Iraq antiwar protests via front groups. But those “professional revolutionaries” of the left are mostly just asleep now. I have no explanation. (Yes, I come from those worlds and have been there.)

    I see a populist upsurge gathering strength in the country. Even Doug Kass has mentioned it. Jim Cramer too. This is something people on all sides of the political spectrum can get involved in, because regardless of your politics, there is lots of common ground.

    1. DownSouth

      Gosh, I don’t know Bob.

      What’s going on in America? Where are the political entrepreneurs?

      I think I’m not alone in asking.

      Here’s an interview of Thomas Frank of What’s the Matter with Kansas? fame, asking some of the same questions. He argues that “the financial crisis presented Democrats with a once-in-a-lifetime opportunity to really defeat conservative populism once and for all.” And yet nothing but bumbling incompetence and depravity from the Democrats.


      I believe maybe we’re approaching a situation in the US which Arendt describes as “power laying in the street.” Some diligent and savvy political entrepreneur can come along and just scoop it up. And therein lays some risk.

      1. bob

        NYS politics seem to prove this. Former HUD head Cuomo is going to waltz right into the governor’s office as a reformer.

      2. Bob Morris

        Why have the Democrats blown it yet again?

        Peter Camejo laid it out well in the Avocado Declaration (http://www.greens.org/s-r/34/34-14.html) in 2004. Because that’s what the role of the Democratic Party is, he says, to siphon off and diffuse real dissent, to stop it from happening.

        (Camejo was active at a national level in the anti-war movement in the 60’s, ran for President on Socialist Workers Party in the 70’s – and was later purged – then got active in the Green Party and ran for California governor twice and was VP on a Nader ticket.)


        “One important value of the Democratic Party to the corporate world is that it makes the Republican Party possible through the maintenance of stability essential for business as usual by preventing a genuine mass opposition from developing. Together the two parties offer one of the best possible frameworks within which to rule a people that otherwise would move society towards the rule of the people, i.e., democracy.

        Democracy remains a great danger for those who have privilege and control. When you are part of the top 1% of the population that has as much income as the bottom 75% of the people, democracy is a permanent threat to your interests. The potential power of the people is so great that it puts sharp limits on what corporations can do. The ability of the Democratic Party to contain, co-opt and demobilize independent movements of the people is a critical element in allowing the continued destruction of our planet… and the immense misdistribution of wealth.”

        Calling it the Avocado Declaration was his little joke. People accused him of being a watermelon. Green on the outside and red on the inside. No, he said, I’m an avocado. green on the outside and on the inside.

        1. Doug Terpstra

          “Because that’s what the role of the Democratic Party is, [Peter Camejo] says, to siphon off and diffuse real dissent, to stop it from happening.”

          Fascinating take on the Dems. Though there are still decent sincere progressive in the party, it is now almost at a dead end. So many glaring opportunities have been blown in spectacular failures—not simply missed goals but stunning scores for the dark side. That much is growing more obvious as economic pain awakens the comatose center, but it has been made immeasurably worse for the party by the fact that Obama so vastly oversold the grail of transformative change just as the culmination of reaganomics was climaxing.

          Oddly, both parties seem to be committing suicide simultaneously. I don’t know if there is a sinister (or benevolent) strategy at play there, but at face value there seems to be a huge opening, finally, for a third party—if the dispossessed can find a way to unify.

        2. Northern Composure

          “Democracy remains a great danger for those who have privilege and control.”

          I think it can be argued that democracy serves them quite well. Since the differences between the two major political parties are merely superficial, the powers that be are able to retain that position while maintaining the illusion of the assent of the people.

          Although there are any number of less favorable forms of government, democracy has its own laundry list of pitfalls, injustices, and unintended consequences.

    2. alex

      Bob Morris: “Marxist left … professional revolutionaries”

      Who are you talking about, and are there more than two of them? And there were plenty of very mainstream citizens staunchly opposed to the Iraq war – no radical politics needed.

      1. Bob Morris

        The organizers behind the ANSWER Coalition and United for Peace are are long-time dedicated Marxists. They are also superb organizers. But absolutely, the vast bulk of those who went to the protests knew nothing about this.

        1. alex

          I stand corrected. It scares me when the extremists start to make sense, because it means the mainstream is making little sense (referring to their anti-Iraq War stance, not necessarily their other positions).

    3. Bob Morris


      I completely agree. That’s why it’s essential that everyone get involved. To prevent one, presumably extremist, faction from jacking the whole thing.

  27. Vinny G.

    His speeches leave me bored to tears too.

    What Oh’bama fails to understand is that his well-crafted oratory skills won’t impress or scare this gang of low-class ruthless criminals that took hold of Wall Street.

    What he needs to do is drop the useless multi-syllable fancy words that nobody understands anyway, and resort more to four letter curse epithets and personal threats against those criminals.

    I will never understand how a man who technically has so much power, and has the FBI at his beck-and-call can be so wimpy. Pathetic!


  28. Fraid Not

    As for myself, I believe some of you are missing the point.

    At those levels, it really doesn’t matter what clothes the emperor is wearing, both red and blue robes bend to the invisible rule of financial gain and personal power.

    The liberals steal your money for social programs, which – alas – will run into funding problems, so we need to raise taxes and increase the deficit, I’m afraid.

    But all these things do expand the power and control and size of government, do they not? Mission accomplished.

    The conservatives steal your money to fund wars against fictitious religious “enemies”, in order to expand “democracy” – which really only means exporting our technologies and other accomplishments to other countries in order to create a larger pool of cheaper labor around the world to profit from. And to support those wars and “humanitarian” efforts, we do need to raise taxes and increase the deficit, I’m afraid.


    What is pathetic is that we are led around by the nose by others – so-called political, financial, industrial, and religious “leaders” in this society – whom we have been taught to trust and believe in and support, even as they pick our pockets, murder our sons and daughters, steal our homes, rob us of decent jobs, and relegate the rest of our children to a lifetime of debt and servitude.

    These people care not for your enthusiastic support of their political affiliation, they only care that it makes you easy to control and predictable to a fault. And they are assured that you will vote and rally and rail against your own best interests in every possible situation in the name of loyal “partisanship”.

    We have been very well educated, indeed.

  29. Nakul

    I think he is setting us up for the Big One:

    – Bankers believe that they made it away from that one and nothing needs to change; they own the system and it works. Too Big To Fail has become a strategic priority for them – and as long as they maintain it they can do whatever they want to do because Uncle Sam will bail them out.

    – Most Americans believe that if anything goes wrong, if anyone in the Executive so much as whispers bailout the President must be impeached. Rank and file Democrats put money they didn’t have into supporting a President who would not be owned by the System – and the sense of betrayal is complete. And Republicans, as an act of faith, believe that all Democratic Presidents must be impeached. And arguably, having witnessed how the bailout did play out – could anyone possibly describe to me how it could have been worse? (I supported the bailout as horribly unfair and unfortunate but necessary – and assumed that all the bad policy coming out of Treasury then was due to Paulson and the Bush cronies, which was all going to change when OUR president took office! Hah!)

    This leaves us with a move to another monstrous frothy moment but without the happy ending. The exposure won’t be a mere $14.5 trillion but several times that figure. The Chinese will inevitably have to come to the conclusion that in Communist indoctranation class they should have had a session on basic finance – you can always lend someone enough money so that they reach a point when they can’t pay it back. Like Britain with North Sea oil where the rise of the Pound killed of British industry, the US did it with Treasuries and other debt.

  30. Paul Tioxon

    While not defending Obama, may I draw your attention to the Mass election, where a close race if not a possible upset in favor of the republicans is taking place. It would be hard to believe that the public at large, which appears it cannot stomach the actual witnessing of the event of a really transparent debate on health care in the middle of an economic catastrophe left by the republicans would evoke anything but rightious vengeance in the form of supporting almost anything the dems would come up with that would better the lives of the public. It would be hard to believe that anything that would hurt the republicans, punish the banks, could not be served up like a meal to a starving man. But, such as things are, the countervailing forces, reactionaries as I like to call them, have been financed and fomented into action. People are screaming at Obama for raising taxes, even if it is on a trillion dollar bank, OMG, liberal taxaholics are strangling individual freedom. Your impassioned yet rational response to this mess, especially in contrast to FDR, is accurtate and authentic. The nature of what Obama is up against or has been coopted by, whatever the case may be, is a very advanced oligarchy, as advanced as an AMD computer chip. The strangle hold on power is not let loose with a slap on the wrist. If the town hall rage is what is let loose by health care reform, which is a modest at best step in the right direction, and does not threaten the oligarchic power arrangement measurably by my reckoning, what do you think is let loose and would continue to be let loose upon the Obama administration for merely ascending to the seat of power and then actually exercising that power on the Wall Street Royalists? Is this a boring first round of boxing with some probing and dancing around? When will the body blows and punches to the kidney start and where O where is the devasting left cross, the right upper cut that will KO the opponent? Is Obama as timid as he looks or is it his personality? Well, I am going to agree with you and say, he needs a new personality. It is a disaster and he should be getting as pissed off as if his grandmother got mugged and pistol whipped. I don’t want him to feel my pain, I want the banks to feel his wrath, and indirectly, yours and mine.

    1. alex

      “Is Obama as timid as he looks or is it his personality?”

      He’s not timid, just bought and sold.

    2. kevin de bruxelles

      The Democrat will unfortunately win in Mass. and health care deform will pass. The Republican candidate there took the bait and is opposing this symbolic punitive measure against Wall Street that Obama is throwing out there.

      This should come as no surprise. It would be very awkward if the Republican won in Mass. and the right then had to suddenly reshuffle things to get this health care passed. While a Republican politician’s outwardly visual theatrics are in opposition to it, just like they are for illegal immigration, as soon as the stage lights fade and they are in a back room with their patrons, they are instructed in no uncertain terms to not block it. ObamaCare is guaranteed welfare for the insurance companies, and the slim edge of the wedge towards privatizing Medicare.

  31. gotgold

    TARP has a rough number around it. Anything for PPIP. If the Fed is buying the MBS crap at face value from the banks, I suspect that number to be a lot larger than TARP

  32. Eric L. Prentis

    President Obama announces up to a $120 billion dollar fee on major US financial firms to pay back, over ten years, lost TARP funds which is an obvious subterfuge to placate the masses. No one seriously believes, with his bank loving economic team of Summers, Geithner and Bernanke that his program will pass muster, or if implemented will be enforced, or if enforced will not die a quick, silent death. Under intense political pressure, Nixon blurted out, “I’m not a crook”; similarly, Obusha will declare, “I’m not a hypocrite.”

  33. alex

    FDR’s inaugural address, as cited by Yves, is far to the left of anything we’re likely to hear today. Any doubts that if Obama gave that speech he’d be branded a Communist? Not to excuse Obama’s complicity in any way, but FDR’s rhetoric is striking to this contemporary American (I like it).

    As for the future success of Obama and the Democrats, I think they’ll suffer from having forgotten what Truman said:

    “Given the choice between a Republican and someone who acts like a Republican, people will vote for the real Republican all the time.”

    1. DownSouth

      Well they branded FDR a “communist,” and a lot worst, but that only seemed to energize him:

      But there was nothing humorous in the attitude of the gentlemen sitting in the big easy chairs at their wide-windowed clubs when they agreed vehemently that Roosevelt was not only a demagogue but a communist. “Just another Stalin–only worse.” “We might as well be living in Russia right now.” At the well-butlered dinner party the company agreed, with rising indignation, that Roosevelt was “a traitor to his class.” In the smoking compartment of the Pullman car the traveling executives compared contemptuous notes on the President’s utter ignorance of business. “He’s never earned a nickel in his life–what has he ever done but live off his mother’s income?” In the cabañas at Miami Beach the sun-tanned winter visitors said their business would be doing pretty well if it weren’t for THAT MAN. In the country-club locker room the golfers talked about the slow pace of the stock market as they took off their golf shoes; and when, out of a clear sky, one man said, “Well, let’s hope somebody shoots him,” the burst of agreement made it clear that everybody knew who was meant.


      The outcry of protest from Wall Street–which was echoed generally in the conservative press–was terrific. The Securities and Exchange Bill, if passed, would end the liquidity of the investment markets and bring general economic ruin! Roosevelt was taking the high road to communism! Had not Dr. William A. Wirt of Gary, Indiana, told of being at a “brain trust” dinner party where, he insisted, government employees had spoken of Roosevelt as merely the Kerensky of a new American revolution? Did not Rexford Tugwell, the Assistant Secretary of Agriculture, appear to be practically a communist–especially to those newspaper proprietors who feared that his proposed bill to regulate food and drug advertising might cut into their revenues? The government was out to ruin all investors in public utilities: it was enlarging the TVA’s sphere of competition with Southern private utilities, it was subsidizing municipalities which wanted to have municipal power and light systems and take their power from the TVA, it was building new dams at Grand Coulee and Bonneville in the West, which would enlarge the area served by public power–and now it was proposing, through the Holding-Company Bill, to apply a “death-sentence” to a lot of helpless holding companies! The issue was clear, shouted the conservatives: it was economic dictatorship versus democracy.

      Back from the New Dealers came the reply: Wall Street’s record of mismanagement had been spread upon the books of the Senate Committee. “The people of the United States will not restore that ancient order.” The New Deal intended to protect the average man against “the selfish interests of Wall Street.”

      Thus the thunder of battle rolled–while Franklin Roosevelt, still overwhelmingly in command of Congress, pushed the reforms through to enactment.

      –Frederick Lewis Allen, Since Yesterday

  34. tricoteuse

    By now it’s clear Obama was installed to be sacrificed to the mass rage induced by this collapse. There’s no risk of him turning out to be a class traitor like FDR because, privileged as his background is, he has no power base and no experience working the apparat. The masses will get a nice catharsis, either by electoral destruction of the Dems or by a humiliating Nixon-style resignation (he’s all set up already by his complicity in the financial coverup.)

  35. gordon

    I haven’t read all of the (92) comments, so somebody might have said this already, but late 2008/early2009 numbers of people were talking about bank nationalisation and even founding a new, Govt. bank. These topics have dropped out of the discussion as existing banks have staggered into some semblance of life. But if the situation is half as bad as Yves Smith says it is, maybe its time to start talking about them again.


    1. Hugh

      I started an Obama scandals list when I felt things were really headed south: http://obamascandalslist.blogspot.com/ to complement one that I had done about the Bush years. It has around 130 entries. It covers all areas. Economics not that much. It goes back to some of the campaign stories when I feel they have something to say about how Obama’s Presidency is turning out. Otherwise I add to it or update it as events present themselves. Even I find it depressing sometimes. Still I look at it as an aid to memory. What spurred me to do the original Bush list was the realization that the sheer volume of bad policy, stupidity, incompetence, corruption, and criminality acted as its own cover. I mean who can even begin to remember it all. So I began these lists as an antidote to this hiding of scandal behind scandal. But I agree it can be a long and sometimes lonely experience writing for an audience that may or may not exist.

  36. Keenan

    RE: Obama playing the public for fools again:

    Has anyone else noted the irony of his advocacy of compulsory private insurance: Forcing citizens into contractual relationship with a corporation – another “person” as defined by the Supreme Court – is simply involuntary servitude.

    The first black president is a party to re-instituting slavery in America.

  37. PeonInChief

    I was never particularly impressed by Obama, although I desperately sought any sense that he understood what was wrong with neoliberal economics. So I’m not disappointed, just angry and depressed. The best thing that can happen at this point is that he becomes the Hoover of the Great Recession and a better candidate appears in 2012. But don’t count on it.

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