On May 8, 5:33*pm, "John R. Carroll"
wrote:
"cavelamb" wrote in message

news
Timothy Geithner's interview (thanks John) was most interesting.

Here is the book end for it.http://www.charlierose.com/view/interview/10280
Also, be sure and watch Liz Warren tonight. She's another keeper, along with
Shiela Bair.



Rethinking the way things ought to work...

Not exactly, it's more like revisiting history and applying lessons learned
long ago.



One thing he said that I thought made sense was "the only reason
that one penny was given to these banks is to keep the people who
depend on them from (going under).

He measured his comments carefully. What he was actually saying was that,
like it or not, the uncontrolled death of these banks would have killed
everybody and while there will be significant carnage, that carnage won't be
the end of the world and while violent, will be relatively short lived.
I don't envy Giethner or any of these guys now in government. They know they
are making decisions and implimenting policy that will have the same effect
on some people that decoy movements have in military operations in the
field. Those decoy attacks are never undertaken by leadership beyond a
certain level you know, and for a perfectly valid reason. The "decoy's" are
not expected to survive their effort.

Something else these guys, all of them, are careful to omit. We started down
the "bail out" road not in August of 2008 but in March of 1981, IIRC, and
the habit has become ingrained.

The initial S&L crisis was dealt with using tax policy. S&L's were allowed
to sell *off mortgages with low returns, sustain the losses, and then apply
those losses directly *- as a tax credit - against taxes paid to the Federal
government over the preceeding ten years. Initially, there was neither a
mechanism to accomplish the sale or a means to dispose of the revalued
mortgages. This defect was corrected by the creation of the mortgage backed
security. The sale of these instruments to Federally chartered bank, BTW,
was illegal initially and had been for 50 years but that was rectified as
well in short order. Fannie and Freddie promptly blessed the things. The S&L
industry didn't just get well, they made a lot of profit on these tax
abetted transactions and before anyone could say "Boo", entire mortgage
portfolios had been sold. This is where the money came to fund the explosive
growth of the next bubble and bust - High Yield Bonds.

The cycle has repeated several time since. The financial services sector
sucks one vein dry only to move on the the next, and with a larger bore
needle for each subsequent vein, always with the support of bought and paid
for politicians ( on both sides of the aisle ) and in the full knoweledge
that the Republican Party had adopted the pattern as one of its formal,
underlying *policies. If only the markets were truly free, so went the
mantra, and beginning in 1999, they were so freed, or at least had seen the
several major impediments removed.
The repeal od Glass-Steagal was the first. By the end of the first Bush
term, banking rules and regulations had been rewritten to allow pensions to
invest directly in hedge funds, something that had been completely illegal -
for the obvious reason. Halleluja Brother and AMEN!!! Can I get an AMEN?
LMAO
The single remaining bastion was The Social Security Trust fund.
Unfortunately for Mr. Bush and his band of criminals, Americans were
beginning to understand that they had been repeatedly played for fools.
Thank the diety of your choice that the administration of George W. Bush had
incompetence and deciet as it's hallmarks. The Bush administration's plan to
privatize SS was met with what can only be called a resounding THUD, largely
because the President of the United States wasn't trusted to tell anything
resembling the truth, a good thing on the one hand and a terrible comment on
the other.
None the less, America dodged a bullet.

At this point, American's needn't worry that the guys running the show ar
Wall Street insiders colluding with their peers. They are not.
They are, however, the product of the culture of bail outs that has grown up
over 30 years or so.
Given that the only tool they know and can use is a hammer, every problem
looks like a nail.
Bernanke, Paulson, Geithner and Kashkari run around forcefully making the
case that there was nothing else to do when the real truth is that there
wasn't anything else that THEY KNEW HOW TO DO. They're response has been
entirely
Pavlovian, in the extreme. The peasants have also responded in kind.



But in the end it's a "confidence game" (maybe in BOTH senses).

But mostly...

Do you have confidence in this recovery?

I have every confidence that the economy will preform well enough for the
Democrats to cement an unasailable majority in both houses in 2010. Whatever
inpetus the economy doesn't provide will be more than compensated for by the
Republican's own behavior. They are completely focussed on their efforts to
rewrite the last eight years of history instead of proposing viable and
intelligent solutions to the challenges of today.

Do you have confidence in this economy?

No, and I won't until I see Congress step up and put a company like GM, or
really GM for starters, down like a dog.
There isn't a single reason America ought to go on the hook to create jobs
in China, Mexico or anywhere else, not in the numbers GM's latest
restructuring plan indicates. That plan says only one thing to me. GM just
doesn't get it and that means they are too stupid to survive.
Then it will be time to release the productive capital of the 19 banks just
stress tested back to the market. We have a mechanism to do this. Congress,
the Obama administration and the American public need to just suck it up,
quit crying like a bunch of Nancy boys and get the hell on with it.

I'd start with a non-bank, AIG. Have Congress pass the necessary
legistlation poste haste, authorize the money with new legistlation and then
just BK the thing the way we sieze a bank.
American's are not the ones that need a confidence transplant, it's the
banking and financial services giants.. The confidence that Citi needs to
have is that when they mess up big, the American taxpayer is going to come
in, sieze and sell their ****, kill the men, rape the women and then burn
what's left to the ground without batting an eye. Were these 19 banks to
believe that this might be their fate, they would probably alter their
conduct in the direction of prudent behavior. The banking business might go
back to being as completely dull as it was in the 40's and 50's. That would
be entirely appropriate and, to borrow a phrase from Mike Milken, *I'd be
highly confident.

JC

APPLAUSE!!! APPLAUSE!!! APPLAUSE!!! APPLAUSE!!!

WELL SAID JOHN!!

TMT