Wall Street's greatest heist: the Tarp

[CHIMO]

Two years ago, the top honchos at the Fed, Treasury and the Wall Street banks were running around like Chicken Little warning that the world was about to end. This fear-mongering, together with a big assist from the elite media (thatis, NPR, the Washington Post, the Wall Street Journal, etc), earned the banks their $700bn Troubled Asset Relief Programme (Tarp) blank cheque bailout. This money, along with even more valuable loans and loan guarantees from the Fed and FDIC, enabled them to survive the crisis they had created. As a result, the big banks are bigger and more profitable than ever.

Now, the same crew that tapped our pockets two years ago is eagerly pitching the line that their bailout was good for us. It may be the case that the history books are written by the winners, but that doesn't prevent the rest of us from telling the truth.

Let's step back to where we were two years ago. The huge investment bank Bear Stearns had collapsed. So had Fannie Mae and Freddie Mac, the mortgage giants. Lehman Brothers, the fourth largest investment bank had also gone down. AIG, the country's largest insurer, had been put on life support by the government.

At this point, Merrill Lynch, Morgan Stanley and Goldman Sachs, the three remaining independent investment banks, all faced runs that would quickly sink them without government intervention. Citigroup and Bank of America, two of the three largest commercial banks, were also almost certainly insolvent. Many other banks also faced insolvency, especially if they took big losses on their loans to other institutions that were about to go bankrupt.

http://www.guardian.co.uk/commentisfree/cifamerica/2010/sep/20/tarp-bailout-banks-wall-street

[jtuck004]

1. What I hate the most about articles like these is the lack

of the discussion of culpability by the banks. They talk about a "run on the bank" and "especially if they took big losses on their loans to other institutions that were about to go bankrupt". Almost like it happened to them, instead of describing a situation created by them.

I appreciate articles that point out that TARP and the other $14.3 trillion in bailout funds was a choice, by people who had worked far too closely with Wall Street over the years. It was so apparent that articles were even written about it, (much like the agency that was supposed to regulate off-shore drilling but was sometimes quite literally in http://online.wsj.com/article/SB10001424052748704026204575266112115488640.html">bed with the people that they were supposed to be regulating). Even after the incredible non-feasance of the regulators, we could have taken the banks who had taken advantage of the American people over, continued payments, broken up their profitable parts, gotten rid of the garbage and their partners, and a lot of very wealthy people both here and overseas would have had to take a haircut. The FDIC does it all the time. (Btw, the whole "this is too complicated for you to figure out, you need to keep us argument" - isn't that the same reason given for putting mob informants in witness protection? Is this a new way to hide them in plain site, leave them in charge of and running the companies?.

On the other hand, the whole damn reason they were in trouble was manufactured by their actions, and that seems to continually slip away unnoticed.. They are the ones that sent people to work in the government to rid themselves of burdensome regulation like Glass-Steagall (Rubin, Gramm Leach Billey act), who got derivatives moved "off the books" so they could not be seen, much less regulated with the Commodity Futures Modernization Act. They were (and sometimes still are) run by people like Stan Oneal who took a fairly conservative company like Merrill Lynch, fired 20,000 people, and started taking on huge, uncontrollable amounts of risk by borrowing 30 and 40 dollars to every one of bank dollars used. This amounted to TRILLIONS of dollars.

They even ramped up the selling of more loans, AFTER AIG had already stopped insuring such paper because the loans were failing, by holding it on their own books and finding foreign investment. Their own internal models showed that the whole scheme hinged on the fact that real estate would not ever fail nationwide, because it never had. Merrill and others even bought mortgage companies to better shove this crap onto unsuspecting home buyers and investors, paid credit rating agencies to give them AAA ratings (Such as found on U.S. Treasuries) on collateralized debt obligations such as the $724,000 home purchased by the field worker in California on his $14,000/yr salary, companies whose record includes forged documents with fake W-2's and fantasy job histories filled in AFTER the person signed the documents.

If one was not schooled in what these villainous, greedy criminal investment banks had done to bring this house of cards down on all of us, it is not clear that this didn't just "happen" to them. They very nearly engineered the chain of events that dropped 30 million people into the ranks of the unemployed and underemployed.

The 20-30 year chain of events which culminated in the housing and credit bubble of the past decade provided a smokescreen for how bad our economy had become, that good-paying manufacturing jobs had been supplanted by debt. If it had not been for the actions of these banks, along with the members of Congress and administrations that did their bidding we would have had at least another 10 years to deal with the tragedies of what we will be facing for at least the next 20. And if it had not been for Bernanke, Summers, Rubin, Geitner, and others we would have several trillion dollars more to create programs which would help our neighbors.

[inna]

2. That would/will make a great OP.

[truedelphi]

3. Have you been able to watch the one hour Docu Drama about

Lehman Brothers and its fall from on High? It has been showing on the money channel.

This version of the tale rather white washes Paulson's governing strategy of helping his buddies at Goldman Sachs and over at AIG do very, very well, and instead chooses to just make it look like Paulson had a bug up his butt and wasn't thinking soundly.

But still, what a tale is told. Paulson is convinced that the Government cannot see everyone as "Too Big Too Fail" and he decides that Lehman will have to become the some that takes the fall - and that by doing so, Paulson insists that the crisis will be averted.

Of course, Lehman takes the fall, but the crisis is not impeded.

What is truly chilling is that Lehman Bros didn't need to fail at all - despite Paulson holding a gun tot he ehads of the executives at Lehman's, the execs found a buyer, Barclay, and Barclay was willing to make an offer.

They also managed the magic trick of getting the Other Big Wall Street Players to put together a fund with 25 Billion bucks to prop up and neutralize their toxic assets. Quite a feat that one.

but int he end, Paulson insists no, the deal with Barclay has to be concluded by Monday night, at midnight - less than 96 hours since Paulson decided to pull the plug on the firm. And since Barclay's cannot round up its shareholders in time for a vote to be made with that deadline, and since Paulson refuses to offer any government money as a backstop,. the firm fails.

it is a firm worth 649 billions bucks, employing 25,000 workers.

And in the end the crisis still rages along, costing us our Empire.

But hey, the big money people, especially the Goldman Sachs people did just great and Geithner still has a job, so this couldn't have all been bad, could it?

[jtuck004]

4. No, I haven't, but I will go look for it. Thank You. n/t

[w4rma]

6. With all the money they printed, we could have completely paid off the national debt,

Instead of doing anything for these con-artists. Which would have been more beneficial to the vast majority of Americans?

[PoliticAverse]

5. Perhaps the worst thing about TARP can be described in 2 words...

Moral Hazard

or, in other words, it's ok to be irresponsible, as long as you are
_very_ irresponsible.