Here’s an open question: now that the fascists are officially running the country, what is the best choice of second language for my 3-year old to learn? I just want her to have options. And please, don’t tell me “Chinese”. I need to know: Mandarin or Cantonese?… is there another?… be specific! Is Canada the future (parlez vous?) or India? If India, which state is most hospitable to the carpetbagging white devil? My provincial upbringing leaves me unequipped to deal with current realities, so any and all suggestions are welcome.
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James Galbraith’s reaction to Geithner’s plan to subsidize the purchase of toxic bank assets? EXAMINE THE LOAN TAPES. Contrary to the oft-repeated claim that the true value of the mystery toxic assets is unknowable (“these new-fangled financial instruments are so gosh darn complex, nobody really knows what they’re worth!”), Galbraith believes a comparison to the IndyMac portfolio will reveal “whether these loans or derivatives based on them have any right to be marketed in an open securities market”…
Note that even a small loss of capital, relative to the purchase price, completely wipes out the interest earnings on the Treasury’s loans, putting the government in a loss position and giving the banks a windfall.
If I’m right and the mortgages are largely trash, then the Geithner plan is a Rube Goldberg device for shifting inevitable losses from the banks to the Treasury, preserving the big banks and their incumbent management in all their dysfunctional glory. The cost will be continued vast over-capacity in banking, and a consequent weakening of the remaining, smaller, better- managed banks who didn’t participate in the garbage-loan frenzy.
This will not achieve the stated goal, of bringing on new lending, for reasons already explained at length. It’s all about not-measuring true asset quality at the big banks, permitting them to escape a clean audit, and therefore preserving them as institutions, while forcing the inevitable shrinkage of the financial sector to occur elsewhere. In short, the plan seems to me to be a very bad idea.
But the way to determine whether Geithner’s and the banks’ stated view of the toxic assets has any merit, is to demand an INDEPENDENT EXAMINATION OF THE LOAN TAPES, particularly looking to establish the prevalence of missing documents, misrepresentation, and fraud. This can be done by a sufficient sample. If the tapes look bad, it will be very difficult to justify the bank/Treasury view that the RMBS actually have value, which is somehow not realizable on the marketplace today because of “liquidity shortages” or “fire-sale conditions.” Maybe there actually was a fire.
What’s most enfuriating in all of this is the thought of how quickly they can shovel money at these greedy fuckers, when for years we’ve been told there’s no money to expand the social safety net, universal single payer health care, social security, what have you…
Wait, did I say most enfuriating? That would be the absolute disinterest on the part of the Obama administration to treat this like a massive swindle. What’s enfuriating is that the unfolding trainwreck of events compels me to spend my free time trying to understand the difference between a CDO and CDS, just so I can pretend to understand what crooked scheme brought down the republic.
Am I being alarmist? Hey, it’s just money after all, right?
One more link I need to get out of my system. This one to an article Matt Taibbi wrote during the election that really took the wind out of my sails at the time. It’s all about the way Wall Street rallied bahind Obama (and vice versa) after he took the Democratic nomination. I sincerely hoped Taibbi was being overly cyncial, that the army of small donors could overwhelm the monied interests once Obama was firmly in charge. Now that seems doubtful.
Other companies are getting in on the ground floor with the new chief by stuffing money in his ears. Overall, Obama is flat-out kicking McCain’s ass when it comes to Wall Street contributions, raking in nearly $9 million from securities and investment executives, compared to $6.2 million for McCain. Obama has received more contributions from Goldman Sachs than from any other employer — more than $627,000 at this writing — not to mention $398,021 from JP Morgan Chase, $353,922 from Lehman Brothers and $291,388 from Morgan Stanley. Even among hedge-fund executives, who have an unequivocal interest in electing McCain, Obama is whipping the Republican, collecting $500,000 more than McCain. All of which begs the question: Why would corporate giants like these throw so much weight behind a man who promises to strip them of billions in tax breaks?
Why, indeed? Especially since, to a cynical observer, the financial panic triggered in September by the collapse of Lehman Bros was perfectly timed to allow the Bush Administration to bestow one last parting gift to Big Business (i.e. $700 billion of TARP funds). I guess when you’ve lost trillions of dollars in careless speculation, it’s best to cover all your bases. Well played, assholes!
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Lastly, some low budget econo-rock… (for the record, this guy’s got nothing on Jimmy Reefercake, though I liked the Turbo Tax line)
Sadly, I fear Krugman may have just jumped the shark…