I agree with you most of the time, but I am not sure what your actually saying here. Are you saying that nationalizing the banks would not cost the tax payers any money? Less money?
It seems to me that Obama is taking the most cautious route available to him. I happen to be very cautious with my money and I appreciate that.

Thanks Dean for your illuminating thoughts and observations.
After wanting to throw my toaster at the TV your blog helps me realize I am not alone having legitimate anger.

Thank you! you are the voice of reason and sanity.

I have reached the point where I think ALL the remaining TARP/TALF, etc would be spent better creating and assisting existing/new good banks and creating jobs.

Not one cent more for the fraudulent banksters on Wall St.

Wall St created the mess because they could self regulate, and pay themselves huge bonuses.
Let Wall St fix the mess they created, and stop holding the taxpayer hostage for bailout with threats, and fear-mongering.
It's time to call their bluff.
We are being fed lies, more lies, and fear by the enslaving classes.

Hello Dean - your blog is great. any way of getting a 'facebook share' button on here? i'm always posting your articles to my page and it would be much easier just to puch a button than to cut and paste.

thanks!

Could we make all of this contingent on the reestablishment of Glass-Steagall?

Is that too much to ask?

Thanks for a great blog.

Unfortunately it seems likely that the $10,000 per family to Wall Street banks, for this version of a Nigerian 419, could be a bit understated. The amount of level three assets among the biggest five is larger than 4 trillion. Yet that does not take into account Wall Street traded banks based in other countries, which we are also bailing out via AIG and other holders of credit default swaps.

Geithner is offering a down payment on a bill that is too large to pay. The Obama administration and the Congress have yet to offer a single solution to the underlying problems. Bonus caps for some employees will in no way fix underlying regulatory malfeasance.

The fact that Wall Street is rallying on what is certainly bad news for the country in general is probably not very surprising. Profit motive is at best amoral, which is why we need responsible leadership within government. A government that abdicates that responsibly in deference to protecting only wealth and power serves little useful function.

It seems possible that by the time this is done there will be a very small number of super-rich and everyone else. If there was a class war, it appears the winners are now just trying to clean up the field.

Damn, that is simply a perfect hypothetical. Dr. Baker, please don't ever stop doing what you do.

Are politicians are responding to the fact that many voters are invested in stocks.

Is this possible with the new "plan"?

Banks own hedge funds. The bank hedge fund bids high on the toxic garbage. The bank owning the hedge fund gets paid. The toxic asset does poorly and the hedge fund walks away. The taxpayer is left with the loss.

Dr Baker please explain how they are going to avoid doing Enron accounting in this new plan?

Let me add an example to my previous question.

The hedge fund owned by the bank knows that the asset will return 50c/$. The hedge fund bids 90c/$. The bank who owns the hedge fund is paid 90c/$.

The hedge fund losses money & the taxpay is left with the overpriced asset. Plus the hedge fund gets to write off a loss against taxes.

Can the above happen?

It's a double win situation for the bankers, and double loss case for the taxpayer.

The government is now refinancing mortgages. How will that work if some of the mortgages in a package purchased by a hedge fund are refinanced? Can the hedge fund simply siphon off the cash from the paid-off mortgages, along with any current payments? If that is the case, the loan package will be substantially degraded.

Just read the latest Real-World Economics Review in utter disbelief:

"[T]he economists should revise their curriculum and require that the following topics be taught: calculus through the advanced level, ordinary differential equations (including advanced), partial differential equations (including Green functions), classical mechanics through modern nonlinear dynamics, statistical physics, stochastic processes (including solving Smoluchowski–Fokker–Planck equations), computer programming" - Joe McCauley

What the HELL do they teach to economics undergraduates?! Seriously, the fact that he can suggest they include a proper helping of ODEs and PDEs is just beyond belief.

What the attention to stock market responses proves is that the only focus of government policy these days is to please Wall Street. If Wall Street is up, it was a success, otherwise a failure. The common good is definitley NOT a consideration of our economic policy executioners. Can you think of a more devastating indictment of the Obama administration?

We should rememebr that all the BS about bank bailouts started when Wall Street tanked on the day Lehman failed. From that moment on, trillions have been wasted to prop up Wall Street. It hasn't worked, by the way, but that is secondary. The real point is that the Dow is the wrong metric of economic sanity, and keeping the stock market from crashing is the wrong objective. We are wasting all this money on fighting windmills instead of doing something useful that would actually be beneficial for people.

Amen piglet.
I don't have the exact, current figure, but something along the lines of the richest 10% in the country own 80% of all stock. Most people really own very little stock, yet we've all been bamboozled into believing that the ups and the downs of the stock market are fundamentally meaningful to our lives.

And the problem of the other $120 trillion in derivatives Wall Street Banks own that are going south with the economy?

Just like the boom in stocks for the military-industrial complex when we "got tough" with Iraq. Does that mean it was "good" for our economy or our people?

POST AIG'S BOOKS ONLINE, call Pelosi @1-202-225-0100. Let's see exactly what WE BOUGHT.

Wow. For 'change' this sure feels like more of the same. We've had near complete continuity with Bush's Iraq policy, even got to keep Bush's Defense Secretary. Now we see that his Treasury Secretary is following through with the Bush Administration's TARP program. Didn't we just have an election, or was I dreaming?

LSN wrote, Are you saying that nationalizing the banks would not cost the tax payers any money? Less money?

Yes, no money or less money.

If we do it Obama/Geithner's way, the taxpayers get stuck holding the bag.

If we do it the right way, the government seizes control of large, insolvent banks and forces a haircut on the bondholders (aside from the relatively small issue of totally wiping out the shareholders), and the taxpayer takes either no losses, or substantially smaller losses.

Listening to Larry Summers discussing this subject with Gwen Ifill tonight and dodging any pointed questions she posed, I found myself pondering whether there was something intrinsic in males that makes them less capable of comprehending higher level economics.

Or perhaps it's just that Summers and his ilk are simply geneticaly incapable of recoginizing financial bubbles and their after effects.

srla-

It is difficult to get a man to understand something when his salary depends upon his not understanding it.
Upton Sinclair

Extremely well put...in terms Main Street can understand. I hope your words reach the mainstream media.

Dick Morris on Hannity just agreed with my speculation (and hope, in my case; fear in Morris' case) that Obama is setting up Geithner to fail so that he can implement a bank nationalization program. I think Obama has some good Machiavellian potential so hopefully, the Geithner plan is just a ruse to leave Republicans no political option but to support bank nationalization (including some bank failures).

To all those who thought Obama to be their(our)savior.
Consider what he has condoned.

Obama supported and voted the original TARP. After the election, Obama choose Geithner (despite him being a tax cheat).
Obama has stood behind Geither as he pushed plan after plan to help the financial 1% elite.

America, is this really your champion? He has clearly shown that the little people are just that.

In retrospect, it is apparent that Obama made some back room deals to gain the necessary backing to win the presidency.

Those deals were with the parties now gaining from his policies.

People...FOLLOW THE MONEY and you will see who exactly was instrumental in getting him elected....(hint it wasn't the general public).

It seems that Rubin is still the chess master. At some point someone will stand up and yell that the emperor has no clothes.

The Great CNBC Sucks wrote, Dick Morris on Hannity just agreed with my speculation (and hope, in my case; fear in Morris' case) that Obama is setting up Geithner to fail so that he can implement a bank nationalization program.

Would that it were so.

One could wonder why the polluter pays principle and pigovian taxation do not apply in financial markets and in the presence of toxic assets.

Great post. I don't see it is a tax that the american people however. I think ultimately it will be forgiven or inflated away.

I think Geithner’s plan will work as intended. The financial system will remain working. The working class of the US and most of the world will not be helped but that was never the intent. Financial power will continue to shift to Asia but the capitalist system doesn’t have a problem with that either.

On a side note what did you think of the blog spat between David Harvey and Brad DeLong?

Raivo Pommer-Eesti
raimo1@hot.ee

Bonibanker

Neun der zehn Manager mit den höchsten Zulagen hätten sich zur Rückzahlung bereit erklärt, von den Top 20 wollten 15 ihre Boni nicht behalten, teilte der New Yorker Staatsanwalt Andrew Cuomo mit. Nach seinen Schätzungen entspricht dies einem Betrag von 50 Millionen Dollar.

Cuomo bedankte sich bei den rückzahlungswilligen Managern für ihre Einsicht. Diese hätten richtig gehandelt und "dem Land gegeben, was es braucht". AIG hatte Anfang März bekanntgegeben, am Ende des vergangenen Jahres den größten Verlust der US-Wirtschaftsgeschichte gemacht zu haben. Das Unternehmen verlor im vierten Quartal 2008 rund 61,7 Milliarden Dollar (rund 49 Milliarden Euro). Für das gesamte vergangene Jahr beläuft sich der Verlust auf knapp 100 Milliarden Dollar.

Laut New York Times flossen nach Worten des New Yorker Generalstaatsanwalts Andrew Cuomo rund 47 Prozent der Prämien an
Amerikaner.

Die Zeitung hatte zuvor berichtet, vor allem Manager aus der Sparte für Finanzprodukte wollten auf umstrittene Boni in Höhe von 30 Millionen Euro verzichten. Die Sparte gilt als hauptverantwortlich für die hohen Verluste des einstmals weltgrößten Versicherungskonzerns, den die Regierung mit Steuergeldern in Höhe von etwa 180 Milliarden Dollar vor der Pleite bewahrte.

On a side note what did you think of the blog spat between David Harvey and Brad DeLong?

Who cares what DeLong has to say about anything? He hasn't been correct about this mess in a long time. Seems he's become an Obamaoid -- follow the leader... do not question... just defend all he does no matter how ridiculous.

DeLong was always a neoliberal tool. But now he's nothing but a Rubinite (and Rubenesque BTW) sack o' merde sucking up to fat cat bankers. He also censors and edits those who disagree with him. One loathsome creature.

For those who can't read Serbo-Hungarian, here is the translation of raivo pommer-eesti's post...

Raivo Pommer-Eesti
raimo1@hot.ee

Премиальный банкир

9 из 10 менеджеров с наивысшими надбавками объявили бы готовыми себя к обратной выплате, от топа 20 15 ее бонусов не хотели сохранять, сообщал житель Нью-Йорка прокурор Эндрю Куомо. По его оценкам соответствует эта одна сумма в размере 50 млн. $.

Cuomo благодарил проявляющих готовность к обратной выплате менеджеров для ее ознакомления. Они правильно действовали бы и " дали бы стране, что нуждается в этом ". AIG объявил начале марта сделать самую большую потерю американской истории экономики в конце прошлого года. Предприятие теряло в четвертом квартале в 2008 примерно 61,7 млрд. $ (примерно 49 млрд. евро). На весь прошлый год потеря составляет почти 100 млрд. $.

Согласно New York Times примерно 47 % премий приближались после слов жителя Нью-Йорка генерального прокурора Эндрю Куомо
Американец.

Газета сообщила раньше, передо всем менеджером из части для финансовых продуктов хотели отказываться от спорных бонусов в размере 30 млн. евро. Часть считается несущей основную ответственность для высоких потерь когда-то самого большого в мире концерна страхования, который правительство с поступлениями от налогов в размере примерно 180 млрд. $ сохраняло от банкротства.

Posted by: raivo померанец eesti | March 24, 2009 2:18 после полудня

J. Bradford DeShortInTheBrains

He also censors and edits those who disagree with him. One loathsome creature.

Agreed.

Rick said A government that abdicates that responsibly in deference to protecting only wealth and power serves little useful function.

The fundamental purpose of all governments is to maintain the status quo, to prevent the masses from rising up against the elites.

I agree with you most of the time, but I am not sure what your actually saying here. Are you saying that nationalizing the banks would not cost the tax payers any money? Less money?

No. He is saying just because something is good for (liked by) wall street does not mean it is good for the economy. I.e. There are lots of things Wall Street might like that are actually not good for the economy and not good for tax payers.

Funny -- back in September I proposed a $10,000 per taxpayer outlay as a solution to the "liquidity" problem, as it was presented back then. Now, as you've stated, we've got exactly the opposite deal as I proposed.

I'm flabbergasted.

This concept is very vague.. how could it be possible.. whether all the exchanges on the wall street has been ended or what.. Now its become more over mandatory to get out of this drastic situation..Used Car Dealers

Wake-up America! our taxes are already at 70 percent and more if you add the 39 percent federal tax to a 23 percent state tax and a state sales tax of 6 or 8 percent plus don't forget property taxes that may exceed 10 percent and all the other hidden taxes we pay every year equal above 72 percent. how long can we keep doing this? We are being robbed America by U.S. government thugs and no doubt by the poor welfare folks who refuse to work and entrapp you into doing it too, and I will prove it.... listen to this and it is true believe me!

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