U.S. bank bailout encourages risky behavior: watchdog

[cory777]

Source: Reuters

Sun Jan 31, 2010 12:30am EST

WASHINGTON (Reuters) - The U.S. taxpayer-funded rescue program set up to save banks from collapse during the financial crisis makes future reckless behavior more likely, the government's bailout watchdog said in a quarterly report.

A quarterly report to Congress on the $700 billion Troubled Asset Relief Program, or TARP, made available in draft form late on Saturday, said financial firms seen as too big to fail before 2008 have only grown larger as they feasted on subsidies from the bailout program.

"To the extent that institutions were previously incentivized to take reckless risks through a 'heads I win, tails the government will bail me out' mentality, the market is more convinced than ever that the government will step in as necessary to save systemically significant institutions," the report from the Office of the Special Inspector General for the Troubled Asset Relief Program, said.

Read more: http://www.reuters.com/article/idUSTRE60U09L20100131

[Alias Dictus Tyrant]

1. well duh

This is not exactly a stunning revelation.

Not wishing to shoot the messenger though. :D

[ThomCat]

2. For decades we've heard Republicans shouting about

Moral Hazard. Government can't help poor people because of Moral Hazard!

Poor people will come to expect that there is No Risk to absolutely doing nothing, so everyone will then decide to stop trying to find crappy jobs and will instead do nothing, everyone will hold out their hands for all of that supposedly overly-generous government help. OH NO!

So in order to prevent this stampede of moral delinquents from stampeding the government and driving the government into bankruptcy, the Only Possible and Reasonable solution according to the Republicans was to kick everyone off of public assistance and/or gut the programs.

If you're not allowed to get help, or if there is no help there for you to get then you can't get addicted to coming to the government for help, and Moral Hazard is averted. It's all for your own good, really.


But here we see a real Moral Hazard has really been created. But not for real people. It has been created for corporations. Republicans don't seem to have any problem with Republicans becoming addicted to government money. How weird.

Corporations, being psychopaths by design, will do anything to get more money. They will hurt anyone to get more money. They will break any rule to get more money. They will change the rules in their favor to get more money, even if that makes something unfair or unhealthy for someone else.

They don't care about the consequences to someone else, so long as they get the money. And in this situation, our government has publicly defined the worst of them as "too big to fail" and promised them that WE will bail them out AGAIN if they are ever on the verge of failing AGAIN.

We are allowing them to remain "too big to fail" so, of course that means we can't allow them to fail. At the same time we are promising them that we will clean up after them next time too. So of course they now have a huge incentive to take the massive risks that have the chance of bringing in the most massive rewards, but could also cause the most massive collapse all over again. Why, because we won't let them fail and we'll clean up that collapse again when it happens.

That huge risk can only benefit them. It offers then no loss at all. WE have volunteered to talk all the losses for them in advance. Go ahead and risk the entire fucking economy for a potentially profitable flip of that coin. We've got your back. Heads they win, tails we lose.


It sickens me that these politicians who bickered and moaned about poor people being driven by Moral Hazard over a few dollars per month allowed this to happen. They gave corporations billions of dollars of our money, and they are already setting us up to do it again.

[no_hypocrisy]

3. This is my take.

Now, we taxpayers risk going to jail if we don't pay our full taxes which will then be distributed to corporations via TARP money which will be budgeted and meted out as political donations to politicians who will keep voting to make sure we give up our money to corporations who will donate our money to politicians to make sure this system stays in place until there's no more money.

[go west young man]

7. Sounds about right.

Big corps can't lose.

[onpatrol98]

9. Well Said

[bertman]

13. Spot-on analysis, ThomCat. Thank you.

[ChickMagic]

37. This has NOTHING to do with the thread

but XOXO to you, ThomCat!

[pattmarty]

4. If Obama really gets tough on these ass holes, THEN I will.......................

..........know he means business and isn't just a smart guy that gives good speeches. This is important shit for ALL the country and he needs to fix it.

[sendero]

8. Exactly.

.... I'm waiting. This is not a "controversial" issue, or a "policy area that needs more consideration".

This is BLACK AND WHITE SIMPLE.

Regulate the banks, split FDIC from IB, do it SOON or there will be even more trouble.

[BumRushDaShow]

5. Bring back Glass-Steagall. Now. n/t

[Mari333]

6. [phone]

[No Elephants]

10. Please give me money to bet with. Cover my losses if I lose. Let me keep my winnings if I win.

No takers? Can't imagine why. :shrug:

[No Elephants]

11. P.S. The bailout was necessary. Just done poorly and not followed up quickly by regulation plus

stiff penalties, as it should have been.

[BlueJac]

12. Come on......

we got the change we can believe in didn't we. Same old players same old results!!

[bertman]

14. Recommend highly. Would anyone care to speculate on the public's reaction if we were to face

another "financial crisis" that required a bailout of the same financial institutions?

Would we sit in front of our TeeVees and whine and moan and MAYBE call our Congresscritters like we did for the last bailout? Or would we freak out on a national scale?

Either way, that scenario would doom the Democratic party to oblivion for eternity. That's why I cannot fathom the pace at which these "reforms" are being worked on.

[harun]

15. No sh*t sherlock.

[brentspeak]

16. Bailout cop: TARP's not working

Source: CNN

Bailout cop: TARP's not working

By David Ellis, staff writerJanuary 31, 2010: 11:06 AM ET

NEW YORK (CNNMoney.com) -- The watchdog charged with monitoring the government's $700 billion bailout unleashed one of his harshest criticisms of the program to date, questioning its overall effectiveness.

In his latest quarterly report to Congress, special inspector general Neil Barofsky said that the Troubled Asset Relief Program, or TARP, has failed to boost bank lending as well as halt the spread of foreclosures -- two key aims of the sprawling program.

snip

When Congress enacted TARP, the hope was that injecting capital into hundreds of banks would spur lending and keep the economy from spiraling even deeper into recession.

But since then, lending to both consumers and businesses has continued to decline.

Read more: http://money.cnn.com/2010/01/31/news/companies/tarp_report/index.htm?section=money_mostpopular&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+rss%2Fmoney_mostpopular+%28Most+Popular%29

[OhioChick]

17. Rec. n/t

[Aramchek]

18. Are we in the midst of the second Great Depression? Not even close.

TARP did what it was supposed to and is now being repaid and used for other purposes.

[brentspeak]

19. Only a complete sucker of the highest possible order would believe

the U.S. would have plunged into a second Great Depression had TARP not been passed.

[angrycarpenter]

20. I think banks are just hibernating

They are just extending the recession to make the president look bad, doing just enough business to maintain and buying up all the small banks who are failing. By the time this is over we may have just a handful of huge banks even more equipped to dictate regulatory policy. They are holding the economy hostage, no new regulation may be the price they extract to start consumer lending again.

[brentspeak]

21. Yes, notice that many small banks are being closed by the FDIC

while the big banks are being propped-up.

[earcandle]

22. They are trying to kill off the American economy and cause civil war as part of the proof needed to

keep believing in Armaggedon.  Asswholes.  We have 150
congress critters and senators who belong to this cult of
death.

We got to root them out and tar and feather (or send to insane
asylums) those creeps who belong to the THE (C Street and
Friends) FAMILY (who Obama apologized to on his Republican
dinner).  It's those satanists with money who have convinced
15 million people to be ready to fight to end the world.  ugh
what a mess. 

one creep at at time, okay? 

[bluestateguy]

23. That's why they should have required lending

Ordered the banks to lend. Not ask. Require.

[No Elephants]

24. "Corporate masters." Servants don't "require" things from their masters.

[Igel]

34. But you have to remember one of the risks taken.

That was making risky loans.

So on the one hand we have people saying, "Stop making risky loans" and on the other hand we have people saying, "Make loans!" Of course, the industry's reported that there are a few reasons for not making loans, one of which is that they don't want to make risky loans and another of which is that companies eligible under the new stringent requirements weren't asking.

[MannyGoldstein]

25. Utter bullshit. Just stop this hater flame bait already.

The bailout's working great, don't let anyone tell you otherwise.

Wall Street bonuses were the highest ever paid, a full 1% of US GDP.

Best,

Larry, Timmy, and Rahm

[avaistheone1]

26. You mean to say that trickle down economics doesn't work?

No doubt being pissed on really stinks.

Most of us are sick of it.

[progressoid]

27. Yeah, I'm feeling pretty trickled upon lately.

[The Northerner]

28. US economic rescue failing to meet key goals:auditor

Source: Agence France-Presse

WASHINGTON (AFP) – The 700-billion-dollar US government effort to rescue the financial system has failed to meet key goals such as sparking lending and curbing risky activities by banks, a special auditor said Sunday.

The special inspector general for the Troubled Asset Relief Program said in a report to Congress that it is too soon to measure the overall success of the program passed at the height of the financial crisis in October 2008.

The quarterly report said that because of TARP, "there are clear signs that aspects of the financial system are far more stable than they were at the height of the crisis in the fall of 2008."

But the report also stated that "many of TARP's stated goals... have simply not been met" and that the potential for a new crisis looms without major reforms.

"Even if TARP saved our financial system from driving off a cliff back in 2008, absent meaningful reform, we are still driving on the same winding mountain road, but this time in a faster car," the report said.

Read more: http://news.yahoo.com/s/afp/20100131/pl_afp/financeeconomyuspublicaid

[OHdem10]

29. And the Banks still resist REFORM. Sending Lobbyists to oppose

serious reform.

[dkf]

30. They want to get theirs. What do they care when they are sitting in glorious retirement

Swimming in money?

[FarCenter]

31. Few of the failing financial institutions were banks

Countrywide, IndyMac, Washington Mutual were thrifts, supervised by the office of thrift supervision.

Lehman, Bear Stearns, Merrill Lynch, Morgan Stanley, Goldman Sachs were investment banks supervised by the SEC.

GMAC, Chrysler Financial, CIT and GE Capital were lending companies.

AIG was an insurance company.

Of the banks, Citgroup got screwed up on its own, Wachovia made an ill advised acquisition of the Golden West thrift, and Bank of America got in trouble because of a government arranged merger with the failing thrift Countrywide and the forced marraige with the failing investment bank Merrill Lynch.

JP Morgan Chase needed assistance only because of the arranged mergers with Bear Stearns and Washington Mutual, but could likely have survived both on their own.

[avaistheone1]

32. k&r

[bvar22]

33. DUH !

The time to impose "regulation" and demand "concessions" is BEFORE giving them the $MONEY.

If you demand anything AFTER you give them the $MONEY, they will simply laugh in your face.
QED

But Obama and the Congress already KNOW that, and KNEW that when they handed over the cash.

I WILL concede that the timing of this THEFT from the Working Class was exquisite, leaving BOTH Co-Conspiring Political Parties the ability to blame the other one. There was a very narrow window-of-opportunity during the administrative change over to get this thing DONE, and Bush, Obama, Democrats, and Republicans performed their roles beautifully.

Anyone who believes the myth that "Congress is too partisan to get anything done" or Congress is too slow to be effective" hasn't really examined the dynamics of The Great Billionaire Bailout of 2008.
Republicans and Democrats worked together so well that the Money was GONE before most Americans knew what was happening!
The beautiful timing left BOTH Parties covered by Plausible Deniability as demonstrated by Obama during the SOTU speech.

NOW we have Your Children’s Money too !!!
And there is not a fucking thing you can do about it!
Now THIS is “Bi-Partisanship” !
Better get used to it!!
Hahahahahahahahaha!



The current Kabuki Theater (getting tough on The Banks) is only good for video bytes and campaign propaganda.
NO effective, enforceable regulation will be forthcoming.

Follow. The. Money.
(from YOUR pocket to THEIRS)

[Igel]

35. Odd article.

One of those that look at an artificial set of criteria and condemn a successful program on mostly irrelevant grounds. Sort of like saying that a car that gets 150 mpg and uses built-in solar cells produced from waste organic materials for the rest of its energy fails because it doesn't have leather seats.

The reason we needed TARP was because of a liquidity crisis. It ended it fairly well.

Selling TARP on that basis was a stupid idea: Nobody would have bought it. It wouldn't have been saleable. The solution? Find goals that are saleable.

Making more loans--having already said that one of the problem was that banks had overextended themselves and, furthermore, had made too many high risk loans. The solution was to make borrowing money harder. In a recesssion. Yet the banks were to both increase capital reserves *and* make more loans. Uh-huh.

Reduce the foreclosure mess. Given the bad assumptions not just as to what was driving it but what would continue to drive it, the fix was simple. But we've seen that the fix wasn't simple.

That said, had the unemployment picture not gone so sour, had the economists predicted that the sharp downtown in the economy in late '08 would be reflected in continual job losses, had they not predicted that the stimulus would mitigate the recession's job losses to such an optimistic degree, etc., etc., these goals might have been realistic. But the assumptions were questionable and should have been identified as questionable.

It succeeded in its necessary object, one that wasn't politically viable; it failed two politically important goals, both of which turned out to be far too optimistic.

[avaistheone1]

36. Good read.