The Bank Bailout Verdict: We Are A Nation Led By Idiots

The financial lunacy continues this morning. Despite growing calls from a chorus of economic thought leaders, President Obama and his minions of malfeasance and denial (Tim Geithner and Lawrence Summers) remain steadfast in their support of propping up our 4 largest zombie banks, Citi, Bank of America, JP Morgan and Wells Fargo.

Let's take a moment to review the action. The once great now reprobate Alan Greenspan says nationalize.  Nobel Laureate Paul Krugman correctly defines the current bailout paradigm as lemon socialsm where the banks get the upside and taxpayers the shaft.  Joseph Stiglitz, George Soros, Nassim Taleb and Nouriel Roubini all agree.  And the cleverly anonymous CR of Calculated Risk understands that if it's partially a semantics battle, then just change the words, and has offered 'pre-privatization' to our fiscal lexicon.

A note: some readers have reacted to our extensive weekend coverage of the mortgage bailout and our harsh words for the concept of helping certain individuals, with an attack that we are wrongfully targeting homeowners and not the banks who have received and will continue to need far more in federal largesse.  And to this I ask, what website have you been reading?  Because it's not this one.  I have attacked the failed banks and their CEOs with venom that is not found anywhere else.  These guys are punks and deserve to be journalistically flailed for their misdeeds.

Stated again for the record, the problem was leverage on the part of our biggest banks. The SEC rule change in 2004 that allowed the Big 5 to dramatically increase their leverage is the single most important event in the entire sordid story.  Were it not for this change and subsequent leverage hike from 12:1 to 40:1, our current crisis would not be so chaotic or expensive.

And it still galls me to this day that the person leading the argument that morning in front of the SEC is none other than former Treasury Secretary Henry 'Hank' Paulson.  I will ask again: when will a journalist with a large audience make it a goal to expose this man and what he has done to imperil your children's future?  He personally helped to pass the rule change that led to this crisis, then he led the effort to solve it by giving $700 billion of borrowed money from your kids to failed banks including his former employer Goldman Sachs, from whom he received $600 million in severance when he headed to Washington.

Another irony seems apparent: Paulson and the other CEOs used the same logic in front of the SEC as they did in front of Congress in the fall of 2008.  Paternal we're-smarter-than-you fear mongering.  "Trust us, we know what we are doing.  It is imperative that you grant us an exemption to the leverage limits so that we can compete on an equal basis with European banks, otherwise the US banking industry could be wiped out by the Europeans.  "Trust us, we know what we are doing. It is imperative that you grant us $700 billion with no oversight and no questions otherwise, the US banking system will be wiped out and your ATM cards will not work."

A call to financial journalists: expose this story and the role Paulson played in creating the crisis.  A Pulitzer Prize is waiting for someone.

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Comments

[Ed]

AIG now reporting they will be losing around $60 billion in the last quarter. F AIG! F AIG! I hate you piece of shit AIG! Hope you all burn to death! F AIG!!

[Mustard Seed]

"And the cleverly anonymous CR of Calculated Risk understands that if it's partially a semantics battle, then let's change the words, and has offered 'pre-privatization' to our fiscal vocabulary."

I found your site originally through CR. You are turning out to be a hell of a site. Keep it up.

[Mortgage_Prison]

"Trust us, we know what we are doing. It is imperative that you grant us an exemption to the leverage limits so that we can compete on an equal basis with European banks, otherwise the US banking industry could be wiped out by the Europeans. "Trust us, we know what we are doing. It is imperative that you grant us $700 billion with no oversight and no questions otherwise, the US banking system will be wiped out and your ATM cards will not work."


Paulson is more than complicit in this fiasco. He was the ringleader of all 5 monkeys. That man deserves prison time and I pray for the day when he does a perp walk.

[Can I Haz Bailout?]

When will you understand that we are powerless. The powers that be could care less what the sheeple think. We are too interested in the Oscars afterparties to make any real noise. The chicago tea party is a good idea but I fear it will happen too late. We need something sooner to help roust our people from their slumber.

[FFDIC]

Citigroup is the latest to get help.

http://www.cnbc.com/id/29351971/site/14081545

[FFDIC]

http://www.cnbc.com/id/29353282

And now AIG wants more money.

[FFDIC]

And here's 1 more on Citigroup with an update.

http://www.cnbc.com/id/29352730

[Ed]

No more money for these damn thieves. How dare AIG come and ask more? Enough is enough! Puke on AIG and these thieves!

[R]

I'm not a fan of the bailouts but I think they are slowly moving in the right direction. start from the bottom and work their way up. convert preferred stock into common first. If that doesn't satisfy capital requirements then go up another step. eventually you get to senior debt. everyone must take a haircut. common gets diluted and debt gets converted. Put the government preferred stock at the end of the line for a backstop. guarantee deposits and counterparties.

[DailyBail]

@R

I agree except how is the conversion from preferreds to common to be accomplished.

Some estimates of our soon-to-be announced investment in citi say we will be paying the equivalent of $12.50 per share. It's acomplicated conversion so we will have to wait to see.

[Ain't Bullshittin']

Look at the crap eatin' grin on Dodds face. He thinks he has a clue....He couldn't put a finger in his eye using both hands!

[Greg Bacon]

The Three Stooges could have handled this "crisis" with more skill, but they're trained in comedy.

They won't stop stealing OUR money until they have totally wrecked the economy and 10 million or more American families are living on the streets, since the banksters stole their home.

Bend over further America, it ain't over yet.

And say "Thank you Sir!, may I have another" each time they ram home their "talking points."

[Be Kind Rewind]

I couldn't help but notice the same thing going on over in Merry old England. They must have you both on some kind of special program that keeps you submissive and looking away.
It's Pelosi all over again.

[imp]

Who do you think controls the Pulitzer Prize?

[Ed]

This is the funniest picture I have even seen. LOL!! LOL Big time. "I Like Ice cream" LOL!! Chris Cox is probably thinking that because he is not doing anything else. LOL again!!

[DC Hater]

These people aren't idiots. This has been calculated for years. Congress passed the legislation back in the Clinton crime years allowing these banks to do exactly what they did to set the stage for their final looting of this country. Of course, you couldn't expect the people that voted for these treasonous scum to actually pay attention to what they were doing and hold them accountable back when it might have mattered. No, no -- there was Survivor, and American Idol, and all of the other shit to distract themselves with. Americans don't like reality or truth. "Just give me 20 cans of piss-yellow 'beer' and let me live vicariously through actors and sports celebrities. I don't want to 'talk politics.'" Well, they're getting their faces pushed right into the toilet bowl of reality now, whether they like it or not.

The fact that Paulson, Greenspan and all the people in DC who voted for this are still alive is proof positive that the real idiots are what would be called "your average Joe." And have you heard that now they're saying that U.S. AID to RECONSTRUCT Gaza will be around 1 TRILLION DOLLARS? Does this shit sound familiar? Can you say Iraq?

[Devildtails]

Please post the popcorn "trail" that paulson left when he gave money to the failing A.I.G...
From what I understand, had aig failed of filed BK... Goldman Sachs would have taken a $$60 billion dollar hit if A.I.G went under hence Paulson giving AIG a huge chunk of change in the bailout.

[A REAL American]

Just more unpatriotic negativity from liberals who hate America, and the troops.

[DailyBail]

@DevilDetails

Here's the first 'popcorn trail link on Goldman Sachs and AIG

http://www.straitstimes.com/Breaking%2BNews/Money/Story/STIStory_287233.html

NEW YORK - GOLDMAN Sachs had purchased US$20 billion (S$29 billion) worth of protection from American International Group in the credit default swap market, and was a 'significant counterparty' to the insurer, according to a former AIG chief executive.

Mr Robert Willumstad, AIG chief executive from June through mid-September 2008, made the statement at a US House Oversight and Government Reform hearing on Tuesday.

The New York Times reported last month that Goldman was AIG's largest trading partner, with US$20 billion in exposure, a report that was shot down by the bank as 'seriously misleading.'


I believe now the number is much higher, perhaps getting close to the $60 billion you mentioned.

[DailyBail]

@DevilDetails

Here's the 2nd link this time from Bloomberg calling the number $37 billion to several investment banks including GS.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aTzTYtlNHSG8



Sept. 29 (Bloomberg) -- As much as $37 billion from federal bailout loans to American International Group Inc. has gone to investment banks including Goldman Sachs Group Inc., the firm Treasury Secretary Henry Paulson used to run.

[DailyBail]

I was a little angry on this day writing about AIG and Goldman. There are 3 doctored, profane photos of the AIG logo that I provided with the story. Some find them entertaining.

http://dailybail.com/home/2009/2/5/rule-bending-banking-bastards-the-taxpayer-shithole-that-is.html

[Santa Monica Monster]

Great picture. There is still much of this tale to be told.

[BotKilla]

This is my favorite so far. Too much video to look at too little time.

http://dailybail.com/home/2009/2/12/bank-bailout-congressional-video-house-rep-brad-sherman-will.html

Bank Bailout Congressional Video: House Rep. Brad Sherman Will Make You Smile as He Plays 'Who's the Idiot' with Bank CEO Gerbils