Obama Financial Team to Taxpayers: You’ll Get Nothing, and Like It February 3, 2009Posted by rogerhollander in Economic Crisis.
Tags: bank failures, bankers, Economic Crisis, failed banks, geithner, jane hamsher, krugman, lawrence summers, lemon socialism, nationalization, obama financial team, roger hollander, senate banking committee, stiglitz, taxpayers, toxic assets, trash for cash, treasury, warren buffet
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As a business person, Warren Buffet quite rightly wanted something for his money when he bought up failed banks that couldn’t get help anywhere else. In fact, he wanted a lot. He expected to have the ability to make sure the same crooks executives weren’t pulling down the same salaries for making the same mistakes, and that the business plan changed. It was pretty basic, a bedrock principle of capitalism, the ability to exercise control appropriate to one’s share of ownership.
We’re about to buy ourselves some failed banks, but we can’t get what Warren Buffet gets because nobody wants to mention the “n” word, nationalization:
One part of that strategy will be addressing the toxic assets that are clogging lenders’ balance sheets and preventing them from expanding credit, people familiar with the matter said last week. Likely approaches include a government-run bad bank to buy and hold some of the securities, and insurance of other assets that remain on banks’ books.
As Dean Baker says, “many, if not most, of our banks are in fact bankrupt… the scope of the toxic asset ‘problem’ has reached $2 trillion… this sum vastly exceeds the capital of the banking system.”
But our money somehow isn’t as good as Warren Buffet’s — all we get for it is the “toxic assets”:
[T]he Obama administration is looking to hand taxpayer dollars to the banks through a variety of complex mechanisms. The main reason for using complex mechanisms (rather than simply seizing bankrupt institutions) seems to be to conceal the fact that we are handing taxpayer dollars to bank shareholders and the wealthy executives who run them.
Krugman calls it “lemon socialism”: “taxpayers bear the cost if things go wrong, but stockholders and executives get the benefits if things go right.” Or as Joseph Stiglitz says, it’s “trash for cash.”
It’s almost inconceivable that anyone would try to sell this as a good deal for taxpayers, but that’s where we are. Krugman:
“We have a financial system that is run by private shareholders, managed by private institutions, and we’d like to do our best to preserve that system,” says Timothy Geithner, the Treasury secretary – as he prepares to put taxpayers on the hook for that system’s immense losses.
Meanwhile, a Washington Post report based on administration sources says that Mr. Geithner and Lawrence Summers, President Obama’s top economic adviser, “think governments make poor bank managers” – as opposed, presumably, to the private-sector geniuses who managed to lose more than a trillion dollars in the space of a few years.
And this prejudice in favor of private control, even when the government is putting up all the money, seems to be warping the administration’s response to the financial crisis.
So Ronald Reagan tells us that government is the “problem,” and George Bush proves it’s true by running the country into the ground. What that really means is that you should never put people in charge of something who philosophically don’t believe that it’s possible to do their jobs well. It doesn’t mean we should be making irrational business deals out of a commitment to the failed ideologies of people who, you know, failed.
We’re paying to nationalize the banks all right, we just can’t talk about it — nor can we profit from it — because the very idea is “socialist” and sits firmly within Jay Rosen’s “sphere of deviance.”
According to Rebecca Christie at Bloomberg, they’ll try to put a few band aids on the bill limiting executive “pay” (not compensation) and dividends, and require banks to step-up lending. But when Timothy Geitner appears before the Senate Banking Committee on February 10, or the House Financial Services Committee shortly thereafter, don’t expect anyone to be offering the Americans footing the bill for this deal anything other than the unwanted detritus of the banks. Our representatives don’t think we deserve to get for our money what Warren Buffet gets for his.
If his banks make money, Warren Buffet makes money. He gets to be richer and his shareholders get to be richer. If our banks get richer, we don’t get to have the schools and green energy and healthcare and SUPERTRAINS that the profits could (and should) pay for — that goes to fois gras and Cristal and Gulf Stream jets for the bankers who created this mess. We just get to keep a big pile of shit. Because suggesting anything else is “deviant.”
Jane Hamsher is the founder of firedoglake.com. Her work has also appeared on The Daily Beat, AlterNet, The Nation and The American Prospect.