Rolling US Economy Into The Shitbin Thread

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]

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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.

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

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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

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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.

never encountered "L-shaped recovery" before; my sediments exactly.

Last and probably least, but by no means trivial, have been the deliberate efforts of the government to pump up the economy. From the beginning, I argued that the American Recovery and Reinvestment Act, a k a the Obama stimulus plan, was too small. Nonetheless, reasonable estimates suggest that around a million more Americans are working now than would have been employed without that plan — a number that will grow over time — and that the stimulus has played a significant role in pulling the economy out of its free fall.

$787 BILLION is all it took to save "around a million" jobs. Nice work, retards.

Googling "lifeboat psychology" comes up with surprisingly few hits.

Like how Big Patriot Act Gitmo Warrantless Wiretap Government averted worse terrorism

Love how Dick Cheney will talk about why the republicans are true guardians of America against the t'rr'ists cos there wasn't an attack under Bush except for 9/11. I mean, t's always nighttime except for when the sun it out.

I think the families of the anthrax victims who died in the weeks following 9/11 would beg to differ with the proposition that the Bush administration prevented any further terrorism.

Kerm the jobs are just one part of what the stimulus bill was supposed to accomplish. Notice how it wasn't called an "employment bill".

by the end of 2009, 24% of ARRA will have been spent, and not much of that on "shovel-ready" projects. a lot of it went out as tax cuts.

http://rutledgecapital.com/2009/06/03/how-much-of-the-stimulus-money-has-already-been-spent/

Yeah. This really isn't analogous to BushCo's claims about averting another catastrophic terrorist attack. Massive terrorist attacks are very hard to accomplish; we've only had one so far (and it was a low-tech/high-concept, so it could have happened in the 70s or 80s or 90s if it was so easy to do), so there's no way to know when another one will occur, or what form it will take. But economists can see the economy headed off a cliff, within reason. Policy measures are prepared to combat that observable, impending disaster. Here, in part, the efforts seem to have paid off.

I'm very -- very -- overtired, so this is a bit (more) incoherent (than usual). But comparing the two situations is comparing apples to oranges.

unfalsifiable apples and oranges

who gives a shit how much we spent for what the fuck ever. how many billions did we set on fire just to stop one hitler and drop two bombs, I ask you?

pick a line you like and stick with it. I'm with Krugman at this point. Tear down the shadow inventory and put up windmills, reappoint Bernanke, we'll be fine.

http://dshort.com/charts/bears/road-to-recovery-large.gif

reappoint Bernanke, we'll be fine.

Earlier this month, Simon Johnson argued that, "If the administration really wants to put the economy on a path to sustainable bubble-free growth, it looks increasingly likely that it will want to replace Bernanke when his term is up early next year." Johnson suggests Geithner as a replacement. Unfortunately, Johnson doesn't provide much detail or examples about how Bernake is resisting the Administration's efforts at legislative reform.

WOWWWWWWWWWWWWWWWWWWWWWWWWWWWWWW

http://www.vanityfair.com/politics/features/2009/10/bailout200910

There wasn’t even anyone within the tarp office to keep track of the money as it was being disbursed.

Hooray I mean oh.

Heavens! We've all been Hank Paulsoned!

I'm gonna be real honest here and admit that every big organization ever (imperial federalist government, Fortune 1000-sized company, etc.) never knows what the fuck is going on or where the money is going. Generally speaking, of course.

"Given that Citigroup had already gone to the government three times for tarp assistance totaling $45 billion, and was not a paragon of public trust, retrofitting the windows with “Safety Shield 800” blastproof window film may have just been common sense."

^^^^
lolz

ha, I had no idea my hometown bank (santa barbara bank and trust) was evil

As you can imagine, Buffett was hearing from a lot of people on that crazy weekend exactly a year ago, when the financial world was falling apart. AIG, desperate to come up with $18 billion, begged him for help. "Don't waste your time on me," he told them. "I'm not going to be able to do anything for you." And around 6 p.m. on that Saturday night, as Buffett was rushing out to a social engagement in Edmonton, Alberta, he got a call from Bob Diamond, the head of Barclays Capital. Diamond was trying to buy Lehman Brothers and rescue it from oblivion, but he was having trouble with British authorities. So he had come up with another plan, one in which Buffett would provide insurance that might make it all work. It was all too complicated for Buffett to take in in a quick phone call, so he asked Diamond to fax him the details. Buffett got back to his hotel room around midnight and was surprised to find ... nothing. Lehman went under, and within days, the world was in a full-blown financial crisis.

Fast forward 10 months. Buffett, who admits he never has really learned the basics of his cell phone, asked his daughter Susan about a little indicator he had noticed on the screen: "Can you figure out what's on there?" It turned out to be the message from Diamond that he had been waiting for that night. (NOTE: Which raises another question: Why didn't Diamond use the fax, like Buffett asked him to?)

I caught up with Buffett afterward, and asked him whether, in retrospect, he might have gone for the deal. He pulled the simple little Samsung phone out of his pocket and pondered it for a moment. It's entirely possible, he suggested. "I don't know."

if even the notorious snoozers at britain's financial services authority were having a problem with the barclays scheme i'm not surprised that buffett wanted more than five minutes to think about it. weird story though.

sounds like the equivalent of faking interference on the phone and hanging up, tbh.

In a haymaker that seemed to have been designed to land right between the figurative eyes of year-old commercial bank holding companies Goldman Sachs and Morgan Stanley, who have amped up their risk profiles and continued their investment banking businesses basically in unchanged form since their conversions to more “conservative” commercial bank status, Paul Volcker barked:

“I do not think it reasonable that public money — taxpayer money — be indirectly available to support risk-prone capital market activities simply because they are housed within a commercial banking organization,” Volcker, 82, said at a financial conference in Los Angeles.

This would be meaningful if the Economic Recovery Board that Volcker runs for Obama were actually a chief policymaking center for the president. But the reality is that the Volcker group is a kind of show-pony the Obama administration kept on as a way to give consolation jobs to the more progressive economic advisers who led them through the campaign season, people like University of Chicago professor Austan Goolsbee.... Will Obama act on Volcker’s recommendations? We should probably wait and see, but I’m not holding my breath.

http://trueslant.com/matttaibbi/2009/09/17/volcker-renews-call-for-limits-on-systemically-important-banks/

I'm not holding my breath, either. Fucking Goldman Sachs should have been put in a sack and tossed down a well last October.

"The big firms... are not going to be allowed to collapse under any circumstances."

http://www.newyorker.com/online/2009/09/21/090921on_audio_politicalscene

no downside to crazypants risk... "[The big firms] are absolutely gleeful."

oh, this is nice...

o paycheck, no health insurance and no job! That's exactly what all InkStop employees are suddenly dealing with. The company has closed all InkStop stores nationwide, which includes 23 stores in Michigan.

InkStop managers called their employees last night at 10 p.m. to notify them that the company was "temporarily closing" while they restructure the company.

All employees have been laid off. To make matters worse, workers did not get their paychecks Friday. On top of that, they also found out that InkStop didn't pay their health insurance premiums for the month of September. Employees just learned that their coverage actually ended August 31.

The Cleveland-based company has 163 stores nationwide.

oops, clipped off the first N there. although "o paycheck" gives it a suitably mournful ring.

and this article oughta be enough to start a pitchfork-and-torch mob, in a country that was paying attention:

Thomas H. Lee Partners of Boston has not only escaped unscathed, it has made a profit. The investment firm, which bought Simmons in 2003, has pocketed around $77 million in profit, even as the company’s fortunes have declined. THL collected hundreds of millions of dollars from the company in the form of special dividends. It also paid itself millions more in fees, first for buying the company, then for helping run it. Last year, the firm even gave itself a small raise.

Wall Street investment banks also cashed in. They collected millions for helping to arrange the takeovers and for selling the bonds that made those deals possible. All told, the various private equity owners have made around $750 million in profits from Simmons over the years.

How so many people could make so much money on a company that has been driven into bankruptcy is a tale of these financial times and an example of a growing phenomenon in corporate America.

Every step along the way, the buyers put Simmons deeper into debt. The financiers borrowed more and more money to pay ever higher prices for the company, enabling each previous owner to cash out profitably.

yeah that latter article is interesting. One thing it doesn't dwell on is that the original sale of Simmons to investors. It says:

"Until the 1970s, Simmons largely prospered. Then the troubles started, and the company was soon buried deep inside two enormous conglomerates, Gulf & Western and the Wickes Corporation, for a number of years."

So the owners of the firm in the 70s decided that it was better to sell out than the alternative (the article just says there were "troubles"). And as a result, the firm stayed in business through 2009. Is almost forty years of extra life worth this outcome? I can see saying: yeah! We (as a firm) got to keep working here for a lot longer than we would have otherwise. Eventually as it turns out the owners who kept grating the firm extra life were unable to grant more extra life. And these owners did very well for themselves. But the firm benefitted too for a long time. And (this is very much what's on my mind): would they have lasted this long without the kind of investors that eventually screwed up the company?

well, the conglomerates that owned it til '86 were a whole different animal than the equity firms that came after. so you're really talking about 23 years. but i think the question isn't so much whether people benefited in the short term -- which, obviously, anyone who had a job there did -- as what that model does to the long-term prospects of any company. i mean, it's possible simmons just wasn't going to be a long-term competitive company, for reasons to do with changes in the mattress industry or who knows what (i have no idea, i don't know anything about mattresses). but the short-term payout that private equity firms want just seems to obviate any kind of long-term thinking at all.

and people keep falling for this -- every time a private equity group buys something, there's always lip service to "we're looking for long-term growth, not short-term profits," and of course they're not ever telling the truth. and i suppose a lot sellers know it, and are just basically choosing to take the cashout themselves.