Rolling US Economy Into The Shitbin Thread

removed. what did it say?

nothing that matters!

is there a reason they won't put it online at rollingstone.com?

m. taibbi is my hero
http://trueslant.com/matttaibbi/2009/06/30/on-giving-goldman-a-chance/

Greider (pasted cuz it's behind sub wall):

Obama's False Reform

By William Greider

This article appeared in the July 13, 2009 edition of The Nation.

The most disturbing thing about Barack Obama's call for financial reform was the way the president falsified our predicament. He tried to make it sound as though everyone was implicated in the breakdown and therefore no one was really to blame. "A culture of irresponsibility took root, from Wall Street to Washington to Main Street," Obama asserted. "And a regulatory regime basically crafted in the wake of a twentieth-century economic crisis--the Great Depression--was overwhelmed by the speed, scope and sophistication of a twenty-first-century global economy."

That is not what happened, to put it charitably. The regulatory system was not overwhelmed by historic forces; it was systematically gutted and dismantled by the government at the behest of banking interests. If Obama wants details, he can consult his economic advisers--including Larry Summers and Tim Geithner--who participated directly in unwinding prudential rules and regulations. Cheers were led by the Federal Reserve, with heavy lifting by both political parties.

If Obama were to tell the truth now about what went wrong, he would face a far larger problem trying to clean up the mess. Instead, he has opted for smooth talk and fuzzy reforms that in effect evade the nasty complexities of our situation. He might get away with this in the short run--Congress doesn't much want to face the music either. But Obama's so-called reform is "kicking the can down the road," as he likes to say about other problems. In the long run, it will haunt the country, because it fails to confront the true nature of the disorders.

Giving more power to the Federal Reserve to be the über-regulator of banking and finance is a terrible idea. Asking the cloistered central bank to resolve all the explosive questions about the overreaching power of financial institutions is like throwing the problem into a black box and closing the lid. That's the reason Wall Street's leading firms first proposed the Fed as super-cop, then sold it to George W. Bush and now Obama. Give the mess to the Wizard of Oz, the guy behind the curtain. This constitutes the high politics of evasion.

Still, a nascent rebellion is gathering strength in Congress. Some 240 House members have endorsed a measure to force auditing of the Fed by the Government Accountability Office--a small but vital step toward dismantling the central bank's privileged secrecy and intimidating mystique.

As someone who has been around this subject for three decades, I have come to understand that the power of financial titans and their friends at the Fed depends crucially on public ignorance. Most legislators are just as clueless as their constituents. If they knew more about how the system works, they would see that most of Obama's reforms are insubstantial gestures, not actual remedies. The president, for instance, proposes to raise the requirements for capital and liquidity held by commercial banks with strict limits on leverage. That is a virtuous proposal, but it leaves unanswered the question, Why did the legal limits already in place fail to restrain bankers' appetites? Indeed, several times in the past two decades the Fed and other central banks enacted new and supposedly more effective capital requirements. The big dogs of banking broke free of the leash again and again, while vigilant watchdogs at the Fed and elsewhere looked the other way. Why should we expect different results next time?

One reason the old restraints failed is the "modernization" that shifted credit functions outside regulated banks and into a variety of unregulated money pots--the so-called shadow banking system of hedge funds and private-equity firms. These interact intimately with traditional banks and give them profitable ways to evade rules or conceal the condition of balance sheets from regulators and investors. These interactions are dazzlingly complex, but this was not an accident. It was the goal of financial deregulation enacted by Bill Clinton, arm in arm with the GOP Congress.

Summers and Geithner suggest that shadowy outfits like GE Capital or major insurance companies can be regulated by the Fed as "Tier 1 Financial Holding Companies." As Joe Nocera recently noted in the New York Times, "Tier 1" sounds like the new name for "too big to fail." The Fed will watch them (we are assured) to prevent "systemic risk." But that is what the Fed should be doing already as the lender of last resort charged with defending the "safety and soundness" of the banking system. The Securities and Exchange Commission, likewise, is supposed to monitor hedge funds and private-equity firms, which thrive on secrecy. Since the SEC failed miserably to police regular corporations, this does not sound reassuring.

Another example of extremely wishful thinking is the proposed rule on securitization of mortgages. The method of bundling home mortgages and turning them into salable bonds was supposed to reduce risk; it did the opposite. The mortgage lenders were able to execute dubious, even fraudulent, loans, collect profits upfront and then sell the package to unwitting investors. Obama's answer is to require the originating lender to retain a 5 percent interest in the mortgage and pass on the rest. That seems ludicrous and innocent of how that cutthroat world works. The financial geniuses who created the subprime scandal could hide 5 percent of the mortgage value with a couple of keystrokes--adding fees, closing costs or other dodges. To really hold lenders responsible, they should be made to hold on to something like 50 percent of liability for the original loan, with perhaps the other 50 percent assigned to whatever bank or investment house packages the mortgage security and sells it to financial markets. That would be "responsibility" with old-fashioned force.

The one bright spot in Obama's plan is the new regulatory agency he recommends to protect consumers of financial products. This was inspired by Elizabeth Warren, the Harvard professor who has been a brave and brilliant critic of the credit card industry and other forms of predatory rip-offs. While it depends entirely on the details, this innovative agency could become the new tiger among tired, toothless regulators--especially if Obama has the courage to name Warren as the inaugural chair. The bankers hate this idea and will fight to kill it. They know this regulator will not be captive to them, at least not yet.

The essence of what's missing in the Obama plan is hard rules. Drawing up concrete prohibitions and commandments is obviously a tougher challenge, because it requires deep understanding of the financial system. You cannot design far-reaching reforms until you understand what led to the breakdown. Since the government has avoided that kind of serious examination, it assigns these explosive issues over to expert regulators--the same experts who failed to see the trouble coming.

Right now, the imperative should be to slow down the rush to weak solutions. Congress would do well to drag its feet while it conducts deeper investigations. A promising new commission has been authorized to investigate the crisis, along the lines of the one run by Ferdinand Pecora in the 1930s, which investigated the causes of the 1929 crash. Let's hope it is not stocked with bank lobbyists. Meanwhile, give subpoena power to Elizabeth Warren and the Congressional Oversight Panel she chairs. Hire some independent investigative reporters eager to dig deeper into the mulch. What exactly went wrong? Who has bloody hands? What fundamental reforms are needed? If the economy returns to "normal" soon, the ardor for serious reform might dissipate. That is a small risk to take, especially if the alternative is enacting the bankers' pallid version of reform.

http://blogs.wsj.com/economics/2009/07/02/broader-unemployment-rate-hit-165-in-june/

http://obsidianwings.blogs.com/obsidian_wings/2009/07/the-optics-are-bad.html

"The Optics Are Bad"

by hilzoy
From the NYT:

"Banks and mortgage lenders are placing top priority on killing President Obama's proposal to create a new consumer protection agency that would regulate home loans, credit card fees, payday loans and other forms of consumer finance.

The Obama administration fired an opening shot on Tuesday, sending Congress a detailed, 150-page proposal for an agency that would set new standards for ordinary mortgages, restrict or prohibit risky loans, investigate financial institutions and enforce new laws aimed at protecting credit card customers.

"This agency will have only one mission -- to protect consumers," said Timothy F. Geithner, the Treasury secretary, in a written statement on Tuesday.

But industry executives vowed on Tuesday to fight Mr. Obama's plan with everything they have, even though banks are still heavily dependent on many taxpayer-supported loans and loan guarantees to get through the crisis. (...)

Bank executives said they knew they faced a difficult political fight, given the soaring number of homeowners facing foreclosure.

"We know the optics are bad," said Scott Talbott, vice president for government affairs for the Financial Services Roundtable, a trade association in Washington. "If you are against a consumer regulatory agency, then everybody will say you're against consumer regulation.""

I suppose that when your industry has come up with such gems as the liar loan, helped bring the entire financial system to the brink of ruin, and helped bankrupt not just the people who took out those loans but people who had nothing to do with them -- people were laid off because of the crisis you helped create -- and when, after all that, you decide to oppose regulation of consumer financial products, you might say that "the optics are bad".

Here's some more bad optics:

"Gabby Ornelas, a former teller at the giant Bank of America Corp., remembers the training sessions. And she remembers her marching orders: "Sell, sell, sell."

Ornelas was instructed to use her Spanish language skills and Latina heritage to sign up customers for as many kinds of banking services as possible, she said -- services that led to lucrative fees for the bank and financial entanglement for many customers.

"We were coached every day to push multiple checking accounts, credit cards and debit cards even when the customer didn't understand how to use them," said Ornelas, who lives in Landover Hills, Md., a town with a large immigrant population and a per-capita income of less than $19,000.

In one case, she described a Central American mother of three who came back to see her at the bank, distressed about $300 in overdraft fees incurred after Ornelas persuaded the woman to open a second checking account. (...)

The former workers said they were going public to lay out what they saw as a little-known side of BofA's business model: encouraging working-class customers to sign up for high-interest-rate credit and cash advance services and structuring an array of check and debit card services to maximize overdraft fees and other charges."

I can see why people who engage in those kinds of practices -- or these, or these -- might be leery of a consumer protection agency. What I can't see is why the rest of us should listen to them. They had their shot at policing themselves. If they wanted to avoid regulation, they should have taken it. They didn't. To my mind, they have long since forfeited the right to complain.

When I heard about last week's bill that was 1300+ pages I thought of the same thing I am thinking of after reading those posts, and its that scene in Brazil where all that paperwork explodes the duct system and Tuttle gets swallowed in it.

taibbi's latest article is fucking awesome
http://www.rollingstone.com/politics/story/28816321/the_great_american_bubble_machine

(and thanks good dr. morbius for the greider article -- only got to look at the first few paragraphs cuz i don't have a subscription)

Goldman Sachs reports record profits. Hooray!

No one has ever made me want to bury my head in the sand quite like Taibbi. Really knows how to make you feel depressed and helpless.

Radio was talking about the market being up because 'banks' were doing better. No dude, its bank. Singular. One bank. One shady ass bank.

From Taibbi's article:

"...the big picture: If America is circling the drain, Goldman Sachs has found a way to be that drain... "

I'm a bit perplexed by the singular fixation on Goldman Sachs -- how were they different from any other investment firm that contributed to the current mess? Also, if anything, isn't their current success partly due to the fact that they were wise enough to limit their exposure to the risky mortgages before everyone else?

I mean I find writing like this a little o_0, especially when you're using it in conjunction with the word "Goldmanite" over and over again:

The first thing you need to know about Goldman Sachs is that it's everywhere. The world's most powerful investment bank is a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.

Such vivid imagery in that description imo.

Goldman Sachs is definitely the place my physics PhD peers were most excited to get a job at a couple of years back.

It just sounds a little too much like certain highly recognizable nazi propaganda that I'm not going to GIS right now for work reasons. And I genuinely don't understand why Goldman Sachs is the nexus, as though the misdeeds of Citigroup and Merrill Lynch, for example, are due not to their own flaws but rather to the fact that their executives used to work at Goldman.

http://octoprop.files.wordpress.com/2009/02/labastille-lapieuvre.jpg

vampire octopus they play their money games so real

I kinda look like that octopus tbh.

Too much hair oil, Charlie.

I'm a bit perplexed by the singular fixation on Goldman Sachs -- how were they different from any other investment firm that contributed to the current mess?

http://mhpbooks.com/mobylives/wp-content/uploads/2009/03/paulson.jpg

I'm a bit perplexed by the singular fixation on Goldman Sachs -- how were they different from any other investment firm that contributed to the current mess?

Because it's made more money than the others?

But they made more money than the others because they got out of the bad shit before everyone else did, not because they created more of it.

But the evidence suggests that they made more money OUT of the bad shit -- continue to make -- than anyone else.

and populist rage is tipping into speculating how lots of them are incompetent but confident silver spoon fucks, like this douche
http://gawker.com/5313375/new-york-observer-owners-lessons-on-how-to-lose-money-and-alienate-people?skyline=true&s=x
though of course there's nothing to that

whole thing's worth reading
http://www.rollingstone.com/politics/story/29127316/the_great_american_bubble_machine/print
And here's the real punch line. After playing an intimate role in four historic bubble catastrophes, after helping $5 trillion in wealth disappear from the NASDAQ, after pawning off thousands of toxic mortgages on pensioners and cities, after helping to drive the price of gas up to $4 a gallon and to push 100 million people around the world into hunger, after securing tens of billions of taxpayer dollars through a series of bailouts overseen by its former CEO, what did Goldman Sachs give back to the people of the United States in 2008?
Fourteen million dollars.
That is what the firm paid in taxes in 2008, an effective tax rate of exactly one, read it, one percent. The bank paid out $10 billion in compensation and benefits that same year and made a profit of more than $2 billion — yet it paid the Treasury less than a third of what it forked over to CEO Lloyd Blankfein, who made $42.9 million last year.
How is this possible?

If I had shorted the market to what value I thought it should be at right now I would have lost all kinds of money... It just keeps going up.

Hmmmm.

Thing is, I really do think the Taibbi piece is good all-in-all, I just find all the gonzo hyperbole schtick distracting. Calls to mind that Samuel Johnson quote: "Where ever you meet with a passage which you think is particularly fine, strike it out."

fwiw I repeatedly called bullshit on the oil bubble on oil threads.

Last year, when Hank Paulson told us all that the planet would explode if we didn’t fork over a gazillion dollars to Wall Street immediately, the entire rationale not only for TARP but for the whole galaxy of lesser-known state crutches and safety nets quietly ushered in later on was that Wall Street, once rescued, would pump money back into the economy, create jobs, and initiate a widespread recovery. This, we were told, was the reason we needed to pilfer massive amounts of middle-class tax revenue and hand it over to the same guys who had just blown up the financial world. We’d save their asses, they’d save ours. That was the deal.
It turned out not to happen that way. We constructed this massive bailout infrastructure, and instead of pumping that free money back into the economy, the banks instead simply hoarded it and ate it on the spot, converting it into bonuses. So what does this Goldman profit number mean? This is the final evidence that the bailouts were a political decision to use the power of the state to redirect society’s resources upward, on a grand scale. It was a selective rescue of a small group of chortling jerks who must be laughing all the way to the Hamptons every weekend about how they fleeced all of us at the very moment the game should have been up for all of them.
Now, the counter to this charge is, well, hey, they made that money fair and square, legally, how can you blame them? They’re just really smart!
http://trueslant.com/matttaibbi/2009/07/16/on-goldmans-giganto-profits/

Kamerad OTMFM

It's becoming more difficult to see this kind of thought as gonzo/batshit/conspiracy as time goes on and you watch this fleecing of taxpayer money happen in broad daylight. But hey if thinking that 'legal' doesn't equal 'just' or 'good' makes me gonzo then ok you win I'm among the gonzos.

its unbelievably lame and depressing.

altho I'm not really sure what the alternative is. You let all these institutions collapse, there would be no infrastructure to keep money flowing - no one would get any loans, companies wouldn't make payroll, jobs would disappear, projects would stop, etc. there would be a total meltdown. Its a weird inversion of the trad capitalist model where the capitalist class has actually successfully been able to argue that THEY are the central engine to the economy, as opposed to, y'know, labor. But that's the logical end-result of building an economy entirely on speculation, and not actual production and value.

er "trad MARXIST model" it should say there

not just taibbi anymore but fortune
http://money.cnn.com/2009/07/17/news/companies/goldman_sachs_tarp_ingratitude.fortune/index.htm?postversion=2009071710
and forbes
http://www.forbes.com/2009/07/16/goldman-sachs-banking-business-wall-street.html
are starting to blame (or scapegoat, depending)

all these institutions collapse

Has anyone written a good scenario about what would happen if we didn't bail out megabanks and insurance congloms? Cos the wonderful Market seems to be saying yeah this should happen...

The economic news as of late sounds like: banks and insurance congloms are doing good again, Wall St is doing good again, but credit is still froze and unemployment is going to keep going up.

In 35 years or so when I'm my parents age want to retire I'm dreading having to put it off so we can bail out these fuckers again to keep this Bubble dream going.

Of course, one reason that over-confidence is so difficult to eradicate from expert fields like finance is that, at least some of the time, it’s useful to be overconfident—or, more precisely, sometimes the only way to get out of the problems caused by overconfidence is to be even more overconfident.
http://www.newyorker.com/reporting/2009/07/27/090727fa_fact_gladwell?currentPage=all

was expecting raise in the $5000-$10000 range

got $200

Was expecting a raise period. Received none.

Still wishing instead of bailing out banks we had given 40k or something to every unemployed citizen.

http://news.yahoo.com/s/ap/20090808/ap_en_ot/us_people_ben_stein

I'm loving these Matt Taibbi blogs. Don't be shy; tell us what you think, Matt.

[quote]

- - - - - - - - - - - - - - - - - - - -

Hank Paulson is a national hero.

I said it last October and I'm sticking by it. And now, there's actual evidence to back me up. The TARP bailout worked. The Wall Street crisis is over."

-- Evan Newmark, "It's Time to Enshrine Hank Paulson as National Hero," Wall Street Journal.

- - - - - - - - - - - - - - - - - - - -

So here's the letter I wrote to the Wall Street Journal after reading Evan Newmark's paean to Hank Paulson last week:

- - - - - - - - - - - - - - - - - - - -

Dear WSJ,

Just out of curiosity -- did Evan Newmark ever work for Goldman, Sachs? And if the answer to the question is yes, don't you think that might have been a good fact to disclose before he fellated Hank Paulson in his "Mean Street" column?

Sincerely,
Matt Taibbi

- - - - - - - - - - - - - - - - - - - -

Can you imagine what a craven, bumlicking ass-goblin you'd have to be to get a job working for the Wall Street Journal, not mention up front that you used to be a Goldman, Sachs managing director, and then write a lengthy article calling your former boss a "national hero" -- in the middle of a sweeping financial crisis, one in which half the world is in a panic and the unemployment rate just hit a 25-year high? Behavior like this, you usually don't see it outside prison trusties who spend their evenings shining the guards' boots. I can't even think of a political press secretary who would sink that low. Hank Paulson, a hero? Are you fucking kidding us?

Exactly what part of Paulson's record is heroic, Evan? The part where he called up SEC director William Donaldson in 2004 and quietly arranged to get the state to drop capital requirements for the country's top five investment banks? You remember that business, right, Evan? Your hero Paulson met with Donaldson and got the rules changed so that Goldman and four other banks no longer had to abide by the old restrictions that forced banks to actually have a dollar or two on hand for every ten or so they lent out. After that, it was party time! Bear Stearns in just a few years had a debt-to-equity ration of 33-1! Lehman's went to 32-1. By an amazing coincidence, both of these companies exploded just a few years after that meeting, and all of the rest of us, Evan, ended up footing the bill, thanks to a state-sponsored rescue of Bear and a much larger massive bailout of Wall Street in general, necessitated in large part by the damage caused by the chaos surrounding Lehman's collapse.

Meanwhile your own Goldman, Sachs ended up with a 22:1 debt-to-equity ratio a few years following that meeting, a number that would have been much higher if one didn't count the hedges Goldman bought through a company called AIG. Thanks in large part to Paulson's leadership in his last years as head of Goldman, the company was so massively over-leveraged that it would have gone under if AIG -- which owed Goldman billions when it went into its death spiral last September -- had been allowed to collapse. But thanks to Hank Paulson, who heroically stepped in and gave AIG $80 billion the same weekend he allowed one of Goldman's last key competitors, Lehman, to collapse, Goldman didn't have to go without that money; $13 billion of the AIG bailout went straight to Goldman. So I guess we have Paulson to thank for the fact that he used about $13 billion of our taxpayer money to essentially bail out his own fuckups. I mean, that's heroism if I've ever seen it. Audie Murphy has nothing on that. Sit your asses back down, Harriet Tubman, Thomas More, Gandhi and Jesus Christ. Hank Paulson is in the house!

Or maybe it was Paulson's foresight in heading off the crisis before it happened that inspired you? Maybe it was the way Paulson pronounced the subprime fallout "contained" in 2007 and called the economy the "strongest in decades?" Or maybe it was the way he remained calm last July, saying that it was a "very manageable situation" and "our regulators are on top of it?" Remember how he said all that shit, Evan, just about six weeks before the world exploded? Remember that Henry Paulson was actually in charge of regulating the financial environment during the last years of the crisis and did nothing as his buddies on Wall Street built one gigantic mountain of leverage after another, gashing underwriting standards across the board, saddling the country with a generation of toxic assets that all of the rest of us will be paying for in taxes (instead of, for instance, a health care program, which we can now no longer afford) for the next fifty fucking years? Do you remember that part?

Or was it his non-intervention last summer when gas prices hit $4.50 a gallon thanks again to his old buddies at Goldman and Morgan Stanley, who juiced the commodities market with so much speculative cash that oil prices soared despite the fact that supply was up and demand was down all year? Do you remember that part? How about the way food prices soared thanks to the same commodities speculators? According to the World Food Program at the UN, about 100 million people joined the ranks of the hungry last year during the commodities spike.

Or maybe it was the way the Treasury Department refused to tell the Congress really anything at all about how it chose whom to give TARP money to; how when the Congressional Oversight Panel asked Paulson what criteria he was using to decide who gets bailout money and who doesn't, he sent Congress back a copy of a TARP application form. Maybe it was that. Or maybe it was the way Paulson got a $200 million tax deferral thanks to an obscure rule that allows executives who join the government to defer taxes on their holdings. That means that not only did Paulson use billions of our money to bail out his own mistakes, he managed to use a loophole to get out of paying his fair share of that same bailout.

Even if it weren't about five years too early to make any kind of judgment at all about whether or not TARP helped, the notion that Henry Paulson is a hero is complete and utter madness because TARP would never have been necessary if someone, anyone who wasn't a greed-addled incompetent like Paulson had actually been regulating the economy in the last years of the Bush adminstration. If anyone besides Paulson had been running Goldman Sachs earlier in this decade -- if a person with a serious brain injury had been in his place, for instance, or a horse, or a head of lettuce -- we'd all be better off today, because there wouldn't be so many toxic Goldman-underwritten mortgage-backed CDOs on the market. We, all of us, are paying the freight for assholes like Paulson, and like you, for that matter. And while we're getting over it, slowly, you're really not helping when you open your mouth and pat yourself on the back for all the good deeds you've done. Spare, us, okay? Just give it up.[/q]

I don't really understand the line about gas prices. The fluxuations in gas prices; the commodities and derivatives markets; and the relationship between monetary policy and inflation are all subjects I need to better understand.

Sorry about the messed-up formatting.

cuts to the core:

The reason a real health-care bill is not going to get passed is simple: because nobody in Washington really wants it. There is insufficient political will to get it done. It doesn’t matter that it’s an urgent national calamity, that it is plainly obvious to anyone with an IQ over 8 that our system could not possibly be worse and needs to be fixed very soon, and that, moreover, the only people opposing a real reform bill are a pitifully small number of executives in the insurance industry who stand to lose the chance for a fifth summer house if this thing passes.

http://trueslant.com/matttaibbi/2009/07/28/the-health-care-bill-dies/

He's got a good point re: democrats in majority and with a dem president if they dont pass it thru they r just slack taters. is congressional vacation in the constitution, or is this bill just not important enough to skip it?

Encouraging article from Paul Krugman on 08.09.09. "But we appear to have averted the worst: utter catastrophe no longer seems likely. And Big Government, run by people who understand its virtues, is the reason why."

Others, like Simon Johnson, who have been highly critical of the various bailouts, seem to grudgingly agree.

Like how Big Patriot Act Gitmo Warrantless Wiretap Government averted worse terrorism. "We're doing a good job because things could be worse!" Right.