Friday, March 8, 2013

But Their Tailors Make You GULP! (Banks WERE and ARE Insolvent: This Is the Biggest Transfer of Wealth in History, As the Giant Banks Have Handed their Toxic Debts from Fraudulent Activities to the Countries and Their People (We Bailed Out Foreign Banks Too!))



Paul Krugman thinks we have to approach our "special needs" audience (and it's not the one you're thinking of first) carefully when we explain the economic facts of life to them.

I understand where this comes from: It comes from many years of electoral defeats and always feeling that, going all the way back to Ronald Reagan, always finding that you needed to appeal to conservative voters — and the quest for respectability. At the higher levels, you find yourself in rooms full of bankers — a lot … It’s very hard to stand up to them, and not just because they have power but because they’re, by and large, actually pretty smart. They have fantastic tailors. And to get over that and say, ‘Look, you’re just wrong,’ and, ‘My side is right’ — that’s something that progressives still have a hard time learning to do.

So my advice has obviously been — part of it is that we need infrastructure, and there’s not enough people — but also, yeah, you need to take a look at the way people express things. If you think it’s really stupid to be cutting spending now, you should start your article by saying, ‘It’s really stupid to be cutting spending now’ instead of saying, ‘the deficit is a significant problem over the medium term, and then, four paragraphs in, say, ‘I do not think it is a good idea to be cutting spending now.’

Lesson concluded.
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To go with the Lobster Thermidor, the senators were treated to sides of White Wine Saffron Gllacage ( menu typo, or is this an actual food product?) and Herbed Fingerlings. If they are real red meat Republicans and chose the prime rib, they got an extra helping of beef marrow to go along with it. No word about whether they picked over Skin-in-the-Game canapes. But the sound of sucking the life out of our bones was certainly echoing through the darkness of the Beltway Swamp last night.

From the inimitable Sardonicky:

Last night, while you were perhaps trying to decide between paying your electric bill or splurging on that long-delayed expensive medical checkup, Blessed Barack and the new Twelve Disciples of the Republican Party were stuffing themselves on terrine de foie gras and Lobster Thermidor as they mulled putting old people on a cat food diet and other creative ways to make your lives even more miserable.

The president had invited a dozen Senators to the exclusive Plume Restaurant at the Jefferson Hotel in Washington in hopes of forging a new testament to safety net cuts in order to appease the heavenly fathers of Wall Street. Far from being a Last Supper, it looks to be the first of many soirees that our demigod president will host in an effort to burnish his legacy. "Do this in remembrance of Me" appears to be the motive of Obama's longed-for Grand Sacrificial Bargain. Jesus knew that one of his own disciples would betray him. But in this perverted Biblical tableau, it is Barry and the Dirty Dozen who would just love to betray all of us. That is their way, that is their truth, that is the purpose of their political lives.

They broke the ice, they broke the bread, they preached austerity, and their zombie ideas will go forth and multiply in the corporate media churches of the nation. From
The Hill:


“I think really what he is trying to do is start a discussion and kind of break the ice and that was appreciated,” said Sen. Mike Johanns (Neb.), one of twelve Republicans who broke bread with Obama. “Most of the meeting was spent on budget and [finding] a way forward. His goal is ours. We want to stop careening from crisis to crisis.”
Johanns said he is more optimistic of reaching a broad deficit-reduction deal this Congress.

“I think he’s very sincere. I think he wants to try to figure something out. Today was a good step and we’ll see what happens now,” he said.
As they gorged themselves on expensive food and slugged down wine priced as high as $1,000 a bottle, the politicians reportedly did not once mention the suffering they have gratuitously imposed on the nation's most vulnerable citizens in the latest bout of austerity known as the Sequester. Although Congress is already moving to restore cuts of the Defense Budget, the cuts to Head Start, the mother/child nutrition program known as WIC, programs for battered women, and low income housing and heating assistance will be allowed to stand. Meanwhile, Obama and his cohort haggle over the destruction of the New Deal in exchange for a few token and meaningless bits of revenue from the rich.

Senator Bob Corker of Tennessee, who has already proposed such "painful" cuts to Medicare that they rival those of the Randian Paul Ryan, confirmed to The Hill that The Sequester was not discussed. The decadent dining experience was merely an appetizer for the main feast, the orgy of mass cannibalism-by-plutocrat. "I think meetings like this are helpful and I think they build relationships," Corker added. “It was as social a meeting as you would find anywhere."

And well it should be. To go with the Lobster Thermidor, the senators were treated to sides of White Wine Saffron Gllacage (
menu typo, or is this an actual food product?) and Herbed Fingerlings. If they are real red meat Republicans and chose the prime rib, they got an extra helping of beef marrow to go along with it. No word about whether they picked over Skin-in-the-Game canapes. But the sound of sucking the life out of our bones was certainly echoing through the darkness of the Beltway Swamp last night.

And you thought the saga of New York City's
Cannibal Cop was disgusting? He's got nothing on the flesh-eaters in suits residing in the lower depths of the Acela Corridor.

Posted by
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Nobel economist Joseph Stiglitz said in 2009 that Geithner’s toxic asset plan “amounts to robbery of the American people”.

And economist Dean Baker said in 2009 that the true purpose of the bank rescue plans is “a massive redistribution of wealth to the bank shareholders and their top executives”.


From the fearsome Washington's Blog:

Global Research

22 February 2013

Virtually ALL of the Big Banks’ Profits Come from Taxpayer Bailouts and Subsidies


The Big Banks “Would Just About Break Even In the Absence of Corporate Welfare”

The government has propped up the big banks for years through massive, never-ending bailouts and subsidies.

Bloomberg noted last year that 77% of JP Morgan’s net income comes from government subsidies.

Bloomberg reported yesterday:

What if we told you that, by our calculations, the largest U.S. banks aren’t really profitable at all? What if the billions of dollars they allegedly earn for their shareholders were almost entirely a gift from U.S. taxpayers?
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Lately, economists have tried to pin down exactly how much the subsidy lowers big banks’ borrowing costs. In one relatively thorough effort, two researchers — Kenichi Ueda of the International Monetary Fund and Beatrice Weder di Mauro of the University of Mainz — put the number at about 0.8 percentage point. The discount applies to all their liabilities, including bonds and customer deposits.

Small as it might sound, 0.8 percentage point makes a big difference. Multiplied by the total liabilities of the 10 largest U.S. banks by assets, it amounts to a taxpayer subsidy of $83 billion a year. To put the figure in perspective, it’s tantamount to the government giving the banks about 3 cents of every tax dollar collected.
The top five banks - JPMorgan, Bank of America Corp., Citigroup Inc., Wells Fargo & Co. and Goldman Sachs Group Inc. - account for $64 billion of the total subsidy, an amount roughly equal to their typical annual profits (see tables for data on individual banks). In other words, the banks occupying the commanding heights of the U.S. financial industry — with almost $9 trillion in assets, more than half the size of the U.S. economy — would just about break even in the absence of corporate welfare. In large part, the profits they report are essentially transfers from taxpayers to their shareholders.
The money hasn’t just gone to the banks shareholders … It has also gone to line the pockets of bank management:

Indeed:

All of the monetary and economic policy of the last 3 years has helped the wealthiest and penalized everyone else. See thisthis and this.
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Economist Steve Keen says:

“This is the biggest transfer of wealth in history”, as the giant banks have handed their toxic debts from fraudulent activities to the countries and their people.
Nobel economist Joseph Stiglitz said in 2009 that Geithner’s toxic asset plan “amounts to robbery of the American people”.
And economist Dean Baker said in 2009 that the true purpose of the bank rescue plans is “a massive redistribution of wealth to the bank shareholders and their top executives”.
We’ve noted for years that the big banks – including Citi, WellsBank of America and the rest – are actually insolvent.

Breaking up the big banks would stabilize the economy … and dramatically increase Main Street’s access to credit.

But the government has chosen the banks over the little guy … dooming both:

The big banks were all insolvent during the 1980s.
And they all became insolvent again in 2008. See this and this.
The bailouts were certainly rammed down our throats under false pretenses.
But here’s the more important point. Paulson and Bernanke falsely stated that the big banks receiving Tarp money were healthy, when they were not. They were insolvent.
Tim Geithner falsely stated that the banks passed some time of an objective stress test but they did not. They were insolvent.
Both the creditors and the debtors were mortally wounded by the 2008 financial crisis. The big banks wouldn’t have survived without trillions in handouts, guarantees, loans, idiot-proof profits courtesy of the government.
The little guy hasn’t been helped since 2008. He has been left to suffer with his life-threatening wounds. See this, this and this.
So the government chose sides. The creditors were wiped out, just like a lot of Main Street was wiped out. In one sense, the government chose who would live (the giant banks and other bailed out and favored companies) and who would die (the other 99%).

But in fact, the big banks were no longer creditors after the 2008 crash. Specifically, the big banks which held the mortgages and the loans were wiped out.
The government moved the arms and legs of the big banks to pretend they were still alive … and have been doing so ever since. But they were no longer going concerns after they went bust.
The government pumped blood back in these dead banks and turned them into zombies. They will never come back to life in a real sense … they are still zombies, 3 years later.
Many of the world’s leading economists and financial experts say that by choosing creditors over debtors, the government is dooming the economy. See this and this.
The big zombie banks can never come back to life, and – by trying to save them – the government is bleeding out the little guy.
By choosing the big banks over the little guy, the government is dooming both.
Remember, the Federal Reserve has paid banks high interest rates to stash money (their “excess reserves”) with the Fed for the express purpose of preventing loans to Main Street.
And the Fed plans to throw more money at the banks when the Federal Reserve starts to tighten. As FT reports:

US Federal Reserve officials fear a backlash from paying billions of dollars tocommercial banks when the time comes to raise interest rates.
The growth of the Fed’s balance sheet means it could pay $50bn-$75bn a year in interest on bank reserves at the same time as it makes losses and has to stop sending money to the Treasury.
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In an interview with the Financial Times, James Bullard, president of the St Louis Fed, said: “If you think of the profitability of the biggest banks, if you’re going to talk about paying them something of the order of $50bn – well that’s more than the entire profits of the largest banks.”
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At the moment it only pays 0.25 per cent interest on those reserves. But according to its exit strategy, published in June 2011, the Fed plans to raise interest rates before it sells assets. Interest of 2 per cent on $2.5tn of reserves would run to $50bn a year.
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The eventual tightening could lead to substantial amounts being transferred to commercial banks from the Fed, given the amounts of cash they have parked there. Wells Fargo has $97.1bn sitting at the Fed, the largest amount of any bank, ahead of JPMorgan Chase at $88.6bn and Goldman Sachs at $58.7bn, according to an FT analysis of SNL data.
Foreign banks also have a striking amount of cash at the Fed, potentially aggravating the Fed’s PR problem. Analysts at Stone & McCarthy noted recently that there had been a steep increase in foreign banks placing reserves at the Fed and suggested that “US banks may have distaste for the opportunistic arbitrage”, between lower market rates and the interest on reserves, whereas overseas institutions “might not feel encumbered in the same fashion”.

Canada’s TD Bank, Germany’s Deutsche Bank and Switzerland’s UBS each have more than $12bn at the Fed.
And while this post focuses on bailouts and subsidies to big American banks, a large percentage of the bailouts went to foreign banks (and see this). And so did a huge portion of the money from quantitative easing. More here and here.


2 comments:

TONY said...

What a privilege to be a taxpaying shareholder of a bank. Paying towards the bankers' bonuses.

Greendayman said...

Hi Suz, love your posts (as usual). I would think that anyone with half a brain would see the bank bailouts for the transfer of wealth that they are but the corporate media machine just keeps rolling over. Disgusting.
I'm back, out of the shadows and ready to rock. I just took a job in rockland and have a private, oceanfront house to move into in Spruce Head. there's room for you if you want to come to Maine. Spring is coming and the weather will be nice.

Love you always - Mark