I Want My Bailout Money (Rap)

The internet might save us.

The "Congressional Oversight Commission" (COP - I didn't make that up) released a report you can read about the TARP (or EESA) program.

Here's my favorite part:


(2) Transparency and Asset Evaluation. The need for transparency is closely related to the issue of accountability. The confidence that Treasury seeks can be restored only when information is completely transparent and reliable. Currently, Treasury’s strategy appears to involve allocating the majority of the $700 billion to “healthy banks,” banks that have been assessed by their regulators as viable without federal assistance. Of course, whether a bank is “healthy” depends critically on the valuation of the bank’s assets. If the banks have not yet recognized losses associated with over-valued assets, then their balance sheets – and Treasury’s assessment of their health – may be suspect.

Many understood the purpose of EESA to be providing assistance to financial institutions that were “unhealthy” and at risk of failing. Such institutions were at risk, the public was told, due to so-called toxic assets that were impairing their balance sheets. EESA was designed to provide a mechanism to remove or otherwise provide clear value to those assets. The case of Citigroup illustrates this problem. Treasury provided Citigroup with a $25 billion cash infusion as part of the “healthy banks” program whereby Treasury made nine initial investments in major banks. About two months later, Treasury provided Citigroup with $20 billion in additional equity financing, apparently to avoid systemic failure, but it did not classify that investment as part of the Systemically Significant Failing Institution program (SSFI program). These events suggest that the marketplace assesses the assets of some banks well below Treasury’s assessment. To date no such mechanism to provide more transparent asset valuation has been developed, meaning that the danger posed by those toxic assets remains unaddressed. The bubble that caused the economic crisis has its foundations in toxic mortgage assets. Until asset valuation is more transparent and until the market is confident that the banks have written down bad loans and accurately priced their assets, efforts to restore stability and confidence in the financial system may fail.

I added the "bolding" in the middle. Let me restate: Citibank was given $25 billion because it was a healthy bank. Then, two months later, it was given $20 billion because it was about to fail.

Anyway, there's a lot more good information floating about now, I suspect, then when France suffered from its hyperinflation. It doesn't really appear to floating around Washington, but after this bailout fails, I think people might get really pissed! I certainly hope so.

It's funny (not really): in Obama's Weekly Address he says, "If we don't take drastic action now, then we will have a more serious problem in the future." Or words to that effect. But isn't that what Paulson and Bernanke said a couple of months ago? We did take drastic action. And then more drastic action. And now still more drastic action is proposed.

*Sigh* Obama is such a great speaker - it's so easy to listen to him spout nonsense. It sounds so good.

Well, more hopeful news: Paul Volker, who last reined in inflation (and was fired for it), is on Obama's "Economic Advisory Board." Maybe he'll get Obama to rein things in. But I doubt it. President's love inflation. It appears to solve so many problems (although it really hides and magnifies them).

http://www.nationalreview.com/nrof_bartlett/bartlett200406140846.asp

Under pressure from Wall Street, Carter reluctantly appointed Paul Volcker to be chairman of the Federal Reserve Board in 1979. Volcker had been under secretary of the Treasury for Richard Nixon and was then serving as president of the Federal Reserve Bank of New York. However, it is naïve to think that Volcker was given a free hand by Carter. His inability to fully implement a tight-money policy is why the inflation rate fell only to 12.5 percent in 1980, despite a sharp recession that year.

It was only after the election, when Volcker knew that Carter had lost, that he really clamped down on the money supply. This illustrates an important point: Presidents get the Fed policy they want, no matter how “independent” the Fed may be. If there had been any doubt about this, it was settled in 1967, when Fed chairman William McChesney Martin buckled under pressure from Lyndon Johnson and eased monetary policy even though Martin knew he should have tightened it. This caused inflation to jump from 3 percent in 1967 to 4.7 percent in 1968 and 6.2 percent in 1969.

90% of government would have to go away if they couldn't print money; and so they print money. Urgh. I wish I knew what to do about that.
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