When China first took over Hong Kong, they ran it much like the British had.  The central government in China has been gradually increasing its control over Hong Kong, though--gradually integrating it into China proper, in practice if not in name.

 

Borrowing money can make a good business better, but it makes a bad business worse. The same goes for governments.

 

Good thing we don't live in Haiti.

 

Less bad thing we don't live in Haiti.

 

Where is there a good government, in your subjective estimation?

 

There really isn't much of one, across the board. There are lots of good ideas scattered out there, and more from recent history that have been lost. (For example, Hong Kong had a lot more going for it before China took it back from the British.)

 

OK.... then how about a foreign country's governmental system that is simply better than ours?  But it has to a comparable society... so you can't say Alaska, for example :)

When China first took over Hong Kong, they ran it much like the British had.  The central government in China has been gradually increasing its control over Hong Kong, though--gradually integrating it into China proper, in practice if not in name.

 

I'm curious what these things are you speak of that have occurred "in practice", because I'm getting the impression that you realize that you've asserted an opinion that you know you don't really have a firm grasp on.  This I find amusing.

 

However this I find bizarre.  I respect your opinion, primarily because unlike most people on this forum you actually know how to write an opinion, assert it, and back it up.  I really do.  But are you seriously saying that of all the governments out there you think the best one is a government that doesn't even provide for universal adult suffrage and relies primarily on unelected civil service bureaucrats to formulate policy?

No.  Recall what I said earlier: I do not hold *any* government up as a model.  Rather, I hold specific components of various governments, current and historical, as a model, and then add a few more of my own for good measure because I don't think that any government (current or historical) really comes close to what I would like to see.  Hong Kong had a fair number of policies that I think were effective because the city-state was very high on most indexes of economic freedom, but I'm well aware that it was hardly paradise.

 

Not everything must be done the way someone else has always (or ever) done it.

Can we get back to the topic, please?

No: I do not hold *any* government up as a model.  Rather, I hold specific components of various governments, current and historical, as a model, and then add a few more of my own for good measure because I don't think that any government (current or historical) really comes close to what I would like to see.  Hong Kong had a fair number of policies that I think were effective because the city-state was very high on most indexes of economic freedom, but I'm well aware that it was hardly paradise.

 

Not everything must be done the way someone else has always (or ever) done it.

 

I see.

 

Glendower: I can call spirits from the vasty deep.

Hotspur: Why so can I, or so can any man?  But will they come when you do call for them?

 

Did you just quote Shakespeare at me on the Internet?

 

Diseased nature oftentimes breaks forth

In strange eruptions.

 

:-P

^Is that what's on your family crest?

 

Burn.

Wall Street to American taxpayers in the 21st century. - Give me your TARP and I will give you financial engineering and my trillion plus bad notes.

 

In all three examples there is one winner and one looser. The transfer of wealth continues onward and upward.

 

Wall Street Collects $4 Billion From Taxpayers as Swaps Backfire

 

"The subprime mortgage crisis isn’t the only calamity Wall Street created that’s upending the finances of U.S. states and cities.

 

For more than a decade, banks and insurance companies convinced governments and nonprofits that financial engineering would lower interest rates on bonds sold for public projects such as roads, bridges and schools. That failed promise has cost more than $4 billion, according to data compiled by Bloomberg, as hundreds of borrowers from the Bay Area Toll Authority in Oakland, California, to Cornell University in Ithaca, New York, quietly paid Wall Street to end agreements since 2008."

http://www.bloomberg.com/news/2010-11-10/wall-street-collects-4-billion-from-taxpayers-as-swaps-backfire.html

^sickening, just sickening.

U.S. retail sales climb 1.2% in October

Sales of autos, building materials. online items drive increase

 

"WASHINGTON (MarketWatch) — U.S. retail sales grew sharply in October, marking the fourth straight monthly gain, as consumers flocked to auto showrooms and made more purchases online.

 

Excluding motor vehicles, however, retail sales rose a more modest 0.4%."

http://www.marketwatch.com/story/retail-sales-in-us-jump-12-in-october-2010-11-15?dist=afterbell

 

 

Only off by 26 points.

 

Empire State Manufacturing Index Turned Negative in November

 

"The Empire State Manufacturing Index, which provides a snapshot of a key U.S. economic region, jolted investors Monday. It took a surprising plunge to a minus 11.14 reading in November -- the index's first negative measure since July -- the Federal Reserve Bank of New York announced today.

 

A Bloomberg survey had expected the Empire State index to dip to 15 in November from 15.73 in October. The index was at 4.14. in September. Readings above zero indicate manufacturing activity is growing; below zero, contracting."

See full article from DailyFinance: http://srph.it/dzUGWf

 

 

November 16, 2010

Pretty Good for Government Work

By WARREN E. BUFFETT

Op-ed for The New York Times

 

Omaha

 

DEAR Uncle Sam,

 

My mother told me to send thank-you notes promptly. I’ve been remiss.

 

Let me remind you why I’m writing. Just over two years ago, in September 2008, our country faced an economic meltdown. Fannie Mae and Freddie Mac, the pillars that supported our mortgage system, had been forced into conservatorship. Several of our largest commercial banks were teetering. One of Wall Street’s giant investment banks had gone bankrupt, and the remaining three were poised to follow. A.I.G., the world’s most famous insurer, was at death’s door.

 

Many of our largest industrial companies, dependent on commercial paper financing that had disappeared, were weeks away from exhausting their cash resources. Indeed, all of corporate America’s dominoes were lined up, ready to topple at lightning speed. My own company, Berkshire Hathaway, might have been the last to fall, but that distinction provided little solace.

 

Full op ed at:http://www.nytimes.com/2010/11/17/opinion/17buffett.html?_r=1&nl=todaysheadlines&emc=a212

Damn, one share of BH is over $120,000.  I'll listen to this guy over anyone

Looks like the housing bust and its accompaning mess will be with us for several years to come. This will definitely put a strain on any real economic recovery and a big strain on home prices.

 

Fitch: Shadow Inventory Will Take 40+ Months To Clear

 

"The non-agency shadow inventory will take more than 40 months to clear, according to projections from Fitch Ratings. The ratings firm pegs the shadow inventory for non-agency residential mortgage-backed security (RMBS) loans at 1.5 million. For all loans, the total is closer to 7 million.

 

Fitch - which defines shadow inventory as the total number of delinquent loans, foreclosures and bank-owned properties - notes that fallout from foreclosure affidavit defects will elongate liquidation timelines and cause further buildup."

http://www.mortgageorb.com/e107_plugins/content/content.php?content.7049

 

'Shadow' supply of 2.1 million homes potentially looms

 

"This "shadow inventory" of residential real estate -- in which the property is either in foreclosure, has a loan 90 days past due or has been taken back by a lender and is not listed for sale -- stood at an eight-month supply at the end of August, according to the Santa Ana mortgage research firm CoreLogic, which released the data. That was an increase from 1.9 million, a five-month supply, a year earlier.

 

The total number of U.S. properties listed for sale at the end of August plus the unlisted shadow inventory was 6.3 million, representing a 23-month supply of homes, according to CoreLogic, more than three times the amount considered healthy by economists."

http://latimesblogs.latimes.com/money_co/2010/11/shadow-supply-of-21-million-homes-potentially-looms.html

 

Speaking of home prices and decline in demand.

 

U.S. new-home sales down 8.1% for October

Median sales price plunges 14% to $194,900, government data show

http://www.marketwatch.com/story/october-new-home-sales-down-81-us-says-2010-11-24

 

How far we have fallen from the boom?

 

New home sales: Down 80% from the boom

http://money.cnn.com/2010/11/24/real_estate/new_home_sales/index.htm?hpt=T2

Another quick look across the pond. Wait until Portugal and/or Spain joins the party.

 

Fresh market turmoil as British bank shares take pounding over fears Irish crisis will spread

 

"Some £3billion was wiped off the value of RBS and Lloyds Banking Group yesterday over fears that the lenders are facing further heavy losses on their £53billion and £27billion respective loans in Ireland."

 

"And investors took further fright as Ireland's shaky coalition government edged towards disintegration - raising fears that a critical four-year budget designed to tackle Dublin's colossal budget deficit will be vetoed by lawmakers."

 

"So if the chaos continues to spread through Europe, we could have to bankroll other ‘basket-case’ economies such as Portugal and even Spain."

 

"Experts have warned that the joint European and International Monetary Fund bailout package might have to be postponed, threatening the stability of the entire eurozone, after a snap general election was called in Ireland."

 

Read more: http://www.dailymail.co.uk/news/article-1331979/IRELAND-BAILOUT-Fresh-market-turmoil-British-bank-shares-pounding.html#ixzz16DXOca9F

Looks like the housing bust and its accompaning mess will be with us for several years to come. This will definitely put a strain on any real economic recovery and a big strain on home prices.

 

Fitch: Shadow Inventory Will Take 40+ Months To Clear

 

"The non-agency shadow inventory will take more than 40 months to clear, according to projections from Fitch Ratings. The ratings firm pegs the shadow inventory for non-agency residential mortgage-backed security (RMBS) loans at 1.5 million. For all loans, the total is closer to 7 million.

 

Fitch - which defines shadow inventory as the total number of delinquent loans, foreclosures and bank-owned properties - notes that fallout from foreclosure affidavit defects will elongate liquidation timelines and cause further buildup."

http://www.mortgageorb.com/e107_plugins/content/content.php?content.7049

 

'Shadow' supply of 2.1 million homes potentially looms

 

"This "shadow inventory" of residential real estate -- in which the property is either in foreclosure, has a loan 90 days past due or has been taken back by a lender and is not listed for sale -- stood at an eight-month supply at the end of August, according to the Santa Ana mortgage research firm CoreLogic, which released the data. That was an increase from 1.9 million, a five-month supply, a year earlier.

 

The total number of U.S. properties listed for sale at the end of August plus the unlisted shadow inventory was 6.3 million, representing a 23-month supply of homes, according to CoreLogic, more than three times the amount considered healthy by economists."

http://latimesblogs.latimes.com/money_co/2010/11/shadow-supply-of-21-million-homes-potentially-looms.html

 

Speaking of home prices and decline in demand.

 

U.S. new-home sales down 8.1% for October

Median sales price plunges 14% to $194,900, government data show

http://www.marketwatch.com/story/october-new-home-sales-down-81-us-says-2010-11-24

 

How far we have fallen from the boom?

 

New home sales: Down 80% from the boom

http://money.cnn.com/2010/11/24/real_estate/new_home_sales/index.htm?hpt=T2

 

2.1 million is over 4% of the single family houses in this country. Of course, some of the 80 million single family houses here are rentals or houses already on the market. This is significant.

 

I hate this term "homes" for houses. It's not a home if nobody lives there, and other types of dwellings are homes when people live there. Even flophouses and the Y.

If only the US would have done this. Instead, we have indebted the citizenry to save private enterprises and lined the pockets of Wall Street.

 

Iceland Is No Ireland as State Free of Bank Debt, Grimsson Says

 

"Iceland’s President Olafur R. Grimsson said his country is better off than Ireland thanks to the government’s decision to allow the banks to fail two years ago and because the krona could be devalued."

 

“The difference is that in Iceland we allowed the banks to fail,” Grimsson said in an interview with Bloomberg Television’s Mark Barton today. “These were private banks and we didn’t pump money into them in order to keep them going; the state did not shoulder the responsibility of the failed private banks.”

 

"Iceland’s banks, which still owe creditors about $85 billion, were split to create domestic units needed to keep the financial system running, while foreign liabilities remained within the failed lenders."

http://www.bloomberg.com/news/2010-11-26/iceland-faring-much-better-after-permitting-banks-to-fail-grimsson-says.html

 

"I hate this term "homes" for houses. It's not a home if nobody lives there, and other types of dwellings are homes when people live there. Even flophouses and the Y."

 

"Homes" is the word for stock that Real Estate Agents and Builders get to try to 'move'.  They get to label which structures are "homes" and which are not.  If it's not something they can sell, then it's not a "home".  Kind of like letting car dealers define the word "vehicle".  If they got to define it, bicycles, buses, scooters and motorcycles would not be included.  Fortunately, the government thought for themselves when they defined the word vehicle.  The media just uses the RE Agents/Builders definition of the word without questioning it.

If only the US would have done this. Instead, we have indebted the citizenry to save private enterprises and lined the pockets of Wall Street.

 

Iceland Is No Ireland as State Free of Bank Debt, Grimsson Says

 

"Icelands President Olafur R. Grimsson said his country is better off than Ireland thanks to the governments decision to allow the banks to fail two years ago and because the krona could be devalued."

 

The difference is that in Iceland we allowed the banks to fail, Grimsson said in an interview with Bloomberg Televisions Mark Barton today. These were private banks and we didnt pump money into them in order to keep them going; the state did not shoulder the responsibility of the failed private banks.

 

"Icelands banks, which still owe creditors about $85 billion, were split to create domestic units needed to keep the financial system running, while foreign liabilities remained within the failed lenders."

http://www.bloomberg.com/news/2010-11-26/iceland-faring-much-better-after-permitting-banks-to-fail-grimsson-says.html

 

 

That would have been a very risky play given the financial institutions which we would have let fail and the impact of those failure on not only our economy.... but the global economy as well.

If only the US would have done this. Instead, we have indebted the citizenry to save private enterprises and lined the pockets of Wall Street.

 

Iceland Is No Ireland as State Free of Bank Debt, Grimsson Says

 

"Icelands President Olafur R. Grimsson said his country is better off than Ireland thanks to the governments decision to allow the banks to fail two years ago and because the krona could be devalued."

 

The difference is that in Iceland we allowed the banks to fail, Grimsson said in an interview with Bloomberg Televisions Mark Barton today. These were private banks and we didnt pump money into them in order to keep them going; the state did not shoulder the responsibility of the failed private banks.

 

"Icelands banks, which still owe creditors about $85 billion, were split to create domestic units needed to keep the financial system running, while foreign liabilities remained within the failed lenders."

http://www.bloomberg.com/news/2010-11-26/iceland-faring-much-better-after-permitting-banks-to-fail-grimsson-says.html

 

 

That would have been a very risky play given the financial institutions which we would have let fail and the impact of those failure on not only our economy.... but the global economy as well.

 

I don't think it would have been significantly more risky than putting America's own credit behind an indeterminate and likely massive amount of nearly certain losses, and would have been the more moral thing to do as well.  Taxpayers will see none of the upside, other than the inchoate "country in better shape" kind of benefits, which both are inascertainable and accrue to the bailed-out bankers as much or more than they do to the average non-banker taxpayer subsidizing his/her share of the bailout.

 

However, while some household names would have vanished had we allowed nature to run its course and the biggest of the overinflated banks to fail, new players would have stepped up to fill the gaps left where those institutions provided services with actual value.  Indeed, the new players might well be divisions of the old players (which are often separate corporations within the same holding company or other umbrella), spun off in bankruptcy as independent companies or sold off in bankruptcy to other players that had capital.

If only the US would have done this. Instead, we have indebted the citizenry to save private enterprises and lined the pockets of Wall Street.

 

Iceland Is No Ireland as State Free of Bank Debt, Grimsson Says

 

"Icelands President Olafur R. Grimsson said his country is better off than Ireland thanks to the governments decision to allow the banks to fail two years ago and because the krona could be devalued."

 

The difference is that in Iceland we allowed the banks to fail, Grimsson said in an interview with Bloomberg Televisions Mark Barton today. These were private banks and we didnt pump money into them in order to keep them going; the state did not shoulder the responsibility of the failed private banks.

 

"Icelands banks, which still owe creditors about $85 billion, were split to create domestic units needed to keep the financial system running, while foreign liabilities remained within the failed lenders."

http://www.bloomberg.com/news/2010-11-26/iceland-faring-much-better-after-permitting-banks-to-fail-grimsson-says.html

 

 

That would have been a very risky play given the financial institutions which we would have let fail and the impact of those failure on not only our economy.... but the global economy as well.

 

I just hope we don't find out that the approach we did take, of taking on all this debt and removing risk from the 'to big to fail' category, ends up looking a lot worse down the road.

I just want to get rid of the 'too big to fail' category altogether.  But, how much did TARP really add to the debt?  I understand the principled argument.  However, my understanding is that most of that money has been paid back.

I just want to get rid of the 'too big to fail' category altogether.  But, how much did TARP really add to the debt?  I understand the principled argument.  However, my understanding is that most of that money has been paid back.

 

TARP was not the only issue. It was the FEDs (taxpayer) taking on a Trillion+ (I have seen numbers even higher) in bad paper from these institutions.

 

I also think on of the biggest issues of all of this is the concept of risk being reduced in certain industries. That is no way to operate a 'free market'. Many health companies have been hurt by not allowing the health to grow/thrive and the insolvent to be removed. We have 'saved' may companies at the expense of other health ones that could have take over the market shares that the insolvent ones left behind.

I don't think it would have been significantly more risky than putting America's own credit behind an indeterminate and likely massive amount of nearly certain losses, and would have been the more moral thing to do as well.

It is moral to prevent people from losing their jobs and industries from vanishing from the U.S.  It is immoral for those things to disappear simply because of the irresponsible acts of some bankers.  We let GM and all of their suppliers fall by the wayside in order to spite bankers who, even if their bank disappears, still get to keep all their salary and bonuses from the bubble period?

 

In addition, U.S. credit (via what people are paying for Treasuries) is the best in the world.  There is no other entity in the world people trust more with their investments, if you care about what the market is saying.

 

Taxpayers will see none of the upside, other than the inchoate "country in better shape" kind of benefits, which both are inascertainable and accrue to the bailed-out bankers as much or more than they do to the average non-banker taxpayer subsidizing his/her share of the bailout.

  The difference between 16% unemployment and 10% is hardly inchoate.

 

However, while some household names would have vanished had we allowed nature to run its course and the biggest of the overinflated banks to fail, new players would have stepped up to fill the gaps left where those institutions provided services with actual value.

But this happened- Bear Stearns, Countrywide, National City, Merrill Lynch, Lehman Bros. are gone, and their assets sold.  The large non-bank actors who were less exposed have either paid back their loans or like Citibank and AIG, are still partly owned by the Fed/Treasury.

 

Indeed, the new players might well be divisions of the old players (which are often separate corporations within the same holding company or other umbrella), spun off in bankruptcy as independent companies or sold off in bankruptcy to other players that had capital.

This is partly what happened, as well as the old players who got cut rate deals for the assets of the now-defunct players.

 

The anti-bailout crowd doesn't have much of a theory about why letting the banks fail punishes those who caused the panic, since they get to keep all the money they made during the bubble that brought on the panic.  They imply that the taxpayers now hold all this debt, but since the only way the government makes money is through the economic activity of the taxpayers (their basis for arguing for low taxes), and the taxpayers aren't economically active if they aren't working, they don't ever talk about how unemployment was supposed to be avoided if all these companies went under.  The government brings in far more revenue when only 10% of its citizens are unemployed instead of 16%, and is therefore less indebted.

 

The business failures and unemployment that followed the panic weren't or wouldn't be natural because the circumstances that proceeded the panic weren't natural.  Only within the last 30 years have investment banks become corporations rather than partnerships, for example.

 

 

Taxpayers will see none of the upside, other than the inchoate "country in better shape" kind of benefits, which both are inascertainable and accrue to the bailed-out bankers as much or more than they do to the average non-banker taxpayer subsidizing his/her share of the bailout.

The difference between 16% unemployment and 10% is hardly inchoate.

 

And you have some serious evidence that the unemployment rate would be 16% if we hadn't bailed out the banks?

 

The anti-bailout crowd doesn't have much of a theory about why letting the banks fail punishes those who caused the panic, since they get to keep all the money they made during the bubble that brought on the panic.

 

11 U.S.C. 548.

 

One can at least hope.  I'm sure at least one or two intrepid attorneys out there would be willing to go up against a lot of former investment bankers for fraudulent transfer recoveries within the corporate bankruptcies of the institutions themselves.

 

They imply that the taxpayers now hold all this debt, but since the only way the government makes money is through the economic activity of the taxpayers (their basis for arguing for low taxes), and the taxpayers aren't economically active if they aren't working, they don't ever talk about how unemployment was supposed to be avoided if all these companies went under. The government brings in far more revenue when only 10% of its citizens are unemployed instead of 16%, and is therefore less indebted.

\

 

Again, waiting for something other than blind faith in crony capitalism to support this notion that 16% unemployment is what we were looking at if we hadn't done TARP.  The administration's own figures were far less--indeed, they predicted that unemployment even without the bailout would stay under 10%.

 

The business failures and unemployment that followed the panic weren't or wouldn't be natural because the circumstances that proceeded the panic weren't natural. Only within the last 30 years have investment banks become corporations rather than partnerships, for example.

 

You have a strange definition of "natural."  Business circumstance are "natural" only if they mirror those that existed 30 years ago?  Do you pick that just because that was when Reagan was elected and the country began to wean itself off the socialist fantasies of the mid-20th century, or do you have some more empirical justification for positing that things after that were "unnatural?"

 

The circumstances that preceded the Lehman crash were perfectly natural irrational exuberance that the market could have handled on its own (with a painful but necessary correction) without a great deal of socializing losses across those who never collected winnings from the Wall Street casino.  There is no credible evidence that the unemployment rate would have skyrocketed to 16%, and we would not be saddled with the ignominy of record-breaking and back-breaking deficits as far as the eye can see.  We are the richest country in the world, and despite recent setbacks, still among the most innovative.  There is no excuse for a strain on our national finances and a stain on our national honor as large as the federal debt was even before 2007, let alone today.

Too bad we can't do it all over again.  At least then we would be discussing something other than colored bubbles.

There are many things in this world that we might wish we could do over again.

 

There are also many things that we hope we never *have* to do over again.

And you have some serious evidence that the unemployment rate would be 16% if we hadn't bailed out the banks?

No.  The paper I was thinking of actually says that there is a 1.5% difference.  Nevertheless, the difference is not inchoate, it is real.

http://www.economy.com/mark-zandi/documents/End-of-Great-Recession.pdf

 

11 U.S.C. 548.

 

One can at least hope. I'm sure at least one or two intrepid attorneys out there would be willing to go up against a lot of former investment bankers for fraudulent transfer recoveries within the corporate bankruptcies of the institutions themselves.

Have at it.  This is your chance to walk the talk!

 

You have a strange definition of "natural."  Business circumstance are "natural" only if they mirror those that existed 30 years ago?

Or those from the 19th century, by your definition.

 

Do you pick that just because that was when Reagan was elected and the country began to wean itself off the socialist fantasies of the mid-20th century, or do you have some more empirical justification for positing that things after that were "unnatural?"

http://en.wikipedia.org/wiki/John_Gutfreund

 

By the way, what difference did Reagan's policies have on real GDP growth rates vs. those under the socialist fantasies of the mid-20th century?

 

The circumstances that preceded the Lehman crash were perfectly natural irrational exuberance that the market could have handled on its own (with a painful but necessary correction) without a great deal of socializing losses across those who never collected winnings from the Wall Street casino.

There's no point in letting resources sit idly and people have their careers begin at a permanently diminished level simply because some bankers didn't know what they were doing, or didn't care.  Likewise there's no point in letting resources sit by idly and people have their careers start at a permanently diminished level simply because those whose careers have already started get some sort of pleasure out of seeing people go through pain and unemployment.

 

There is no credible evidence that the unemployment rate would have skyrocketed to 16%, and we would not be saddled with the ignominy of record-breaking and back-breaking deficits as far as the eye can see. We are the richest country in the world, and despite recent setbacks, still among the most innovative. There is no excuse for a strain on our national finances and a stain on our national honor as large as the federal debt was even before 2007, let alone today.

This is about finance, not about national honor.  It doesn't make one feel very honorable to lose your job through no fault of your own.  There's nothing dishonorable about debt either- its the engine that drives capitalism and the innovation you are praising!

 

Those who say they love the market better than the rest of are usually the first to forget that it allocates resources, not plenary and partial indulgences.

And you have some serious evidence that the unemployment rate would be 16% if we hadn't bailed out the banks?

No. The paper I was thinking of actually says that there is a 1.5% difference. Nevertheless, the difference is not inchoate, it is real.

http://www.economy.com/mark-zandi/documents/End-of-Great-Recession.pdf

 

I'll have a look at that later, if I have time, but I'm already skeptical.

 

11 U.S.C. 548.

 

One can at least hope. I'm sure at least one or two intrepid attorneys out there would be willing to go up against a lot of former investment bankers for fraudulent transfer recoveries within the corporate bankruptcies of the institutions themselves.

Have at it. This is your chance to walk the talk!

 

What exactly are you talking about?  These actions can exist only within bankruptcy proceedings.  It is possible that there may be actions like this in the Lehman bankruptcy, though at this point (more than two years in), it appears unlikely, especially because, absent a tolling agreement or some other mechanism for extending the statute of limitations, the statute of limitations on avoidance actions is two years (and therefore would have expired in September).  I don't know the status of the Lehman bankruptcy or any attempts its administrative officers might have made to recover exorbitant payouts to bankers over the period from September 2006 to September 2008.

 

You have a strange definition of "natural." Business circumstance are "natural" only if they mirror those that existed 30 years ago?

Or those from the 19th century, by your definition.

 

I haven't the faintest idea what you're talking about here.

 

Do you pick that just because that was when Reagan was elected and the country began to wean itself off the socialist fantasies of the mid-20th century, or do you have some more empirical justification for positing that things after that were "unnatural?"

http://en.wikipedia.org/wiki/John_Gutfreund

 

Try finding a link that is on topic and supports your argument.  The issue is not whether investment banks started to go public in 80s.  The issue is whether private investment banks are "natural" and public ones are "unnatural."  I'm well aware that there are economic risks (e.g., moral hazard) in publicly traded investment banks, since the bankers are taking risks with others' money--but then again, so are all directors and officers of all publicly traded corporations, which is why we have the corporate fiduciary duty laws.

 

The circumstances that preceded the Lehman crash were perfectly natural irrational exuberance that the market could have handled on its own (with a painful but necessary correction) without a great deal of socializing losses across those who never collected winnings from the Wall Street casino.

There's no point in letting resources sit idly and people have their careers begin at a permanently diminished level simply because some bankers didn't know what they were doing, or didn't care. Likewise there's no point in letting resources sit by idly and people have their careers start at a permanently diminished level simply because those whose careers have already started get some sort of pleasure out of seeing people go through pain and unemployment.

 

So much begging the question here that I don't even know where to begin.  Also, considering that trillions are sitting idle in the real world, in which the bailout happened, even if you could show that a great deal of money would be sitting idle if we'd left the national balance sheet in better shape, you'd be hard pressed to show that even more would be sitting idle in a world of lower federal bailout commitments and lower federal debt than in the world we live in today.

 

There is no credible evidence that the unemployment rate would have skyrocketed to 16%, and we would not be saddled with the ignominy of record-breaking and back-breaking deficits as far as the eye can see. We are the richest country in the world, and despite recent setbacks, still among the most innovative. There is no excuse for a strain on our national finances and a stain on our national honor as large as the federal debt was even before 2007, let alone today.

This is about finance, not about national honor. It doesn't make one feel very honorable to lose your job through no fault of your own. There's nothing dishonorable about debt either- its the engine that drives capitalism and the innovation you are praising!

 

Those who say they love the market better than the rest of are usually the first to forget that it allocates resources, not plenary and partial indulgences.

 

I'm well aware that you put very little store by concepts such as national honor.  I find that attitude repulsive and comfort myself in the knowledge that there is at least a small body of voters out there that see things differently, but I think that even in your sterile, dispassionate world, you could find studies on the psychological implications--in both individual and group psychology--of debt burdens.  I mentioned the strain on the nation's finances as well as the stain on our national honor, of course, because even divorced from any intangible compounding of the deleterious effects of the newly-supersized debt, the strain on our finances will be significant when interest rates rise.

 

Also, debt is only one of the engines of capitalism, and far from the most important, even when we're talking about private debt (i.e., debt taken on by corporations to fuel expansions and investments), not public debt (which, by definition, overwhelmingly fuels consumption-type expenditures because money is fungible and consumption-type expenditures are the dominant type of government outlays).  You also seriously misunderstand capitalism if you think that the government guaranteeing the bad debts of failing corporations (or individuals) is somehow pro-free market.

I'll have a look at that later, if I have time, but I'm already skeptical.

You don't have the time?  You post constantly.

 

Try finding a link that is on topic and supports your argument.  The issue is not whether investment banks started to go public in 80s.  The issue is whether private investment banks are "natural" and public ones are "unnatural."  I'm well aware that there are economic risks (e.g., moral hazard) in publicly traded investment banks, since the bankers are taking risks with others' money--but then again, so are all directors and officers of all publicly traded corporations, which is why we have the corporate fiduciary duty laws.

That was the reason I said "30 years".  Try to keep up.

 

So much begging the question here that I don't even know where to begin.  Also, considering that trillions are sitting idle in the real world, in which the bailout happened, even if you could show that a great deal of money would be sitting idle if we'd left the national balance sheet in better shape, you'd be hard pressed to show that even more would be sitting idle in a world of lower federal bailout commitments and lower federal debt than in the world we live in today.

Things are sitting idle in the real world because people are out of work and institutions aren't investing because demand is weak and there (was/maybe still is) a strong desire for safe financial investments.  The fact that resources are currently sitting idle isn't some argument for not doing the bailout.

 

I'm well aware that you put very little store by concepts such as national honor.  I find that attitude repulsive and comfort myself in the knowledge that there is at least a small body of voters out there that see things differently, but I think that even in your sterile, dispassionate world, you could find studies on the psychological implications--in both individual and group psychology--of debt burdens.

This is absolutely beyond the pale and I hope it attracts moderator attention... ah, who am I kidding, I don't care if you talk shit.

 

But beyond that, what was a clear statement on my part, that national debt has nothing to do with national honor, was twisted by you to say that "I put very little store in concepts such as national honor."  That's clearly not what I said, and I stand by my statement that a nation's or an individual's indebtedness has nothing to do with honor.

 

I mentioned the strain on the nation's finances as well as the stain on our national honor, of course, because even divorced from any intangible compounding of the deleterious effects of the newly-supersized debt, the strain on our finances will be significant when interest rates rise.

Yeah, you've been predicting an imminent rise in interest rates for some time now.  How accurate has that been?

 

Also, debt is only one of the engines of capitalism, and far from the most important, even when we're talking about private debt (i.e., debt taken on by corporations to fuel expansions and investments), not public debt (which, by definition, overwhelmingly fuels consumption-type expenditures because money is fungible and consumption-type expenditures are the dominant type of government outlays).  You also seriously misunderstand capitalism if you think that the government guaranteeing the bad debts of failing corporations (or individuals) is somehow pro-free market.

Consumption is the problem right now son.  You seriously misunderstand capitalism when you don't believe anything can be done to the demand side.

Maybe the two of you could take this to private messages?

Try finding a link that is on topic and supports your argument.  The issue is not whether investment banks started to go public in 80s.  The issue is whether private investment banks are "natural" and public ones are "unnatural."  I'm well aware that there are economic risks (e.g., moral hazard) in publicly traded investment banks, since the bankers are taking risks with others' money--but then again, so are all directors and officers of all publicly traded corporations, which is why we have the corporate fiduciary duty laws.

That was the reason I said "30 years".  Try to keep up.

 

So what exactly makes things "unnatural" in the past 30 years?  Why was the evolution from private to public investment banks an "unnatural" evolution instead of a natural one?  I'm not disputing that it began to happen approximately 30 years ago.  I'm asking why you chose that line of demarcation between the "natural" evolution of the banking industry (or the economy more generally, if that was what you meant ... this started when you stated that this recession had "unnatural" causes).

 

But beyond that, what was a clear statement on my part, that national debt has nothing to do with national honor, was twisted by you to say that "I put very little store in concepts such as national honor."  That's clearly not what I said, and I stand by my statement that a nation's or an individual's indebtedness has nothing to do with honor.

 

And I stand by my assertion of the opposite.  I have seen a great, great many examples of the psychological consequences of debt burdens--primarily at the individual level, of course, just because of my work.  I have seen credible reports that analogous psychological effects accompany large public debt burdens, when such work their way into prominence in a collective entity.

 

I mentioned the strain on the nation's finances as well as the stain on our national honor, of course, because even divorced from any intangible compounding of the deleterious effects of the newly-supersized debt, the strain on our finances will be significant when interest rates rise.

Yeah, you've been predicting an imminent rise in interest rates for some time now.  How accurate has that been?

 

The fact that it has not happened yet doesn't mean much, though you're right that I expected upward movement by now.  I would not have expected it, however, 6-12 months ago.  The dollar has, however, lost ground against many, many foreign currencies, which is not something we should be proud of even with the transient boost it gives American exporters.  It effectively amounts to a disguised wage cut for American workers.

 

Also, debt is only one of the engines of capitalism, and far from the most important, even when we're talking about private debt (i.e., debt taken on by corporations to fuel expansions and investments), not public debt (which, by definition, overwhelmingly fuels consumption-type expenditures because money is fungible and consumption-type expenditures are the dominant type of government outlays).  You also seriously misunderstand capitalism if you think that the government guaranteeing the bad debts of failing corporations (or individuals) is somehow pro-free market.

Consumption is the problem right now son.  You seriously misunderstand capitalism when you don't believe anything can be done to the demand side.

 

Even Keynes did not advocate that polities that were already heavily indebted should bury themselves even deeper in debt.  I strongly doubt he would have approved of the bailout plan as any kind of anti-recessionary act.

 

EDIT: MayDay, sorry, wrote to LK before seeing your subsequent post.  I'll try to stay on the recession topic ... though I do believe that the financial system bailouts exacerbated and prolonged the recession, so it's hard to keep the two completely separate.

The fact that it has not happened yet doesn't mean much, though you're right that I expected upward movement by now. I would not have expected it, however, 6-12 months ago. The dollar has, however, lost ground against many, many foreign currencies, which is not something we should be proud of even with the transient boost it gives American exporters. It effectively amounts to a disguised wage cut for American workers.

But it balances things out by making our exports more attractive to purchasers overseas.

 

That is precisely why Germany and China don't want to see the dollar have a relative decrease in value, because they don't want our exports, particularly our manufactured goods, from becoming more competitive, because their systems are in large measure ones that strive at full employment above all things.

 

There's nothing inherently harmful about the dollar's relative devaluation- a loss on one side of the devaluing results in a gain on the other side.  Obviously there are risks inherent in inflation, but there are likewise risks in long term unemployment.  The real problem for the U.S. economy is all the private household debt that is out there.  Things that will encourage employment to give consumers more opportunity to pay down their private debt is what shoud be the first order of business to combat the recession and improve the economy.

Things that will encourage employment to give consumers more opportunity to pay down their private debt is what shoud be the first order of business to combat the recession and improve the economy.

 

Now on this point, I won't argue.  Household debt is definitely problematic.  However, I think this sounds a little surprising and inconsistent from you--since payments to banks, credit card companies, etc. to settle private debts do not flow immediately back into the consumer economy.  I'm quite OK with that, because I do not see the consumer-spending-driven economic model as either immutable or desirable (which, by implication, of course, means I'd like to change it).  I'm more surprised to hear you endorsing it, because so much of what you've been endorsing has been demand-side spending incentives.  Paying off debt is not spending; it's saving.  (It's economically nearly equivalent to buying a bond with the same interest rate as the debt you're paying off--i.e., an investment, not a consumer expenditure--though it doesn't come with the liquidity that a debt security typically does, in exchange for guaranteed stability and peace of mind.)

 

As for the risks in the dollar's relative devaluation: in the short term, that may be true, but in the long term, a strong currency is a bedrock of a strong economy.  Maintaining currency strength represents foregoing a transient measure of instant gratification in exchange for longer-term rewards.  If inflating one's way out of debt was really a viable economic stimulus plan, Latin American economies would be the envy of the world.

Gramarye said - "As for the risks in the dollar's relative devaluation: in the short term, that may be true, but in the long term, a strong currency is a bedrock of a strong economy.  Maintaining currency strength represents foregoing a transient measure of instant gratification in exchange for longer-term rewards.  If inflating one's way out of debt was really a viable economic stimulus plan, Latin American economies would be the envy of the world."

 

 

Brazil and China are all the rage in the economic world right now.

This could turn out to be VERY interesting. Note: This is not meant to spur discussion about WikiLeaks in this thread.

 

WikiLeaks plans to release a U.S. bank's documents

 

"WASHINGTON (Reuters) - The founder of whistle-blower website WikiLeaks plans to release tens of thousands of internal documents from a major U.S. bank early next year, Forbes Magazine reported on Monday."

 

"Asked what he wanted to be the result of the disclosure, he replied: "I'm not sure. It will give a true and representative insight into how banks behave at the executive level in a way that will stimulate investigations and reforms, I presume."

 

"He compared this release to emails that were unveiled as a result of the collapse of disgraced energy company Enron Corp."

 

"This will be like that. Yes, there will be some flagrant violations, unethical practices that will be revealed, but it will also be all the supporting decision-making structures and the internal executive ethos ... and that's tremendously valuable," Assange said."

http://www.reuters.com/article/idUSTRE6AS68S20101129

 

Gramarye said - "As for the risks in the dollar's relative devaluation: in the short term, that may be true, but in the long term, a strong currency is a bedrock of a strong economy. Maintaining currency strength represents foregoing a transient measure of instant gratification in exchange for longer-term rewards. If inflating one's way out of debt was really a viable economic stimulus plan, Latin American economies would be the envy of the world."

 

Brazil and China are all the rage in the economic world right now.

 

Yes, and Brazil's recent rise has in part been due to their abandonment of currency manipulation as a substitute for real growth, and they were never quite as bad as some Latin American countries.  To the best of my knowledge, at least, Brazil hasn't deliberately devalued the real in a long time now, though I admit that I'm not as up on my recent Latin American economic history as I should be.

China's currency peg means that the U.S. can't inflate against the RMB in order to spur exports. It's my hypothesis that we're exporting inflation to China via the peg (and probably to a lesser extent Canada due to menu costs and a psychological 1:1 peg). Some have speculated that the missile launch off the California coast was a Chinese warning in direct response to QE2, but I've seen no conclusive evidence of this.

Bruce Bartlett, former domestic policy advisor to President Reagan and treasury official under Bush the Elder, has a pretty pithy description of how most folks tend to view the strength of our currency:

 

"They are also incapable of seeing the exchange value of the dollar except in macho terms, which demands that the dollar be strong at all times. That makes about as much sense as saying the price of oil or any other commodity should always be strong. That's obviously nuts, but the dollar is no different. It must be allowed to adjust freely for changes in supply and demand or the result will be imbalances--too much will be imported if the dollar is overvalued, too little exports, thus increasing American's international indebtedness. Indeed, it was right wing saint Milton Friedman who taught economists the truth of this mechanism."

 

The article:

http://capitalgainsandgames.com/blog/bruce-bartlett/2056/mike-pence-not-ready-prime-time?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+CapitalGainsAndGames+%28Capital+Gains+and+Games+-+Wall+Street%2C+Washington%2C+and+Everything+in+Between%29

 

China is keeping their currency devalued in an attempt to export unemployment to others.  The U.S. isn't exporting inflation to anyone.

I have never, and will never, buy the concept that any country's currency can be overvalued or undervalued. It is valued at exactly what it's worth. And I will never believe that China is somehow hurting us by "manipulating its currency," either. I'll tell you why.

 

Because China sees a massive imbalance in capital flows (far more dollars flow in than RMB flow out) and indeed legislates to prevent outward capital flow, their currency should appreciate rapidly (high demand, fixed supply), but the Bank of China keeps the RMB on target at roughly 6.7:1. It does this by printing a ton of money and returning it to its Treasury.

 

A currency is only valued based on its supply and the commensurate demand for it. Because China's economy is growing so fast, demand for the RMB is rising. The BoC's scheme will only work right if demand for its currency is rising; as soon as it drops we're looking at a 1994 Mexico crisis situation.

 

Anyway, if the BoC let the currency float and appreciate, prices in China would drop through the floor in terms of RMB and the average Chinese worker would suddenly find himself a whole lot wealthier. But instead, the BoC appropriates that gain for government purposes in the form of an inflation tax (the only difference is that prices stay the same in RMB terms, but the private sector forgoes that gain they could realize by rapidly appreciating savings/assets and falling prices)

 

That's how I see it. Mark my words, China is not selling us goods for less than what it costs for them to produce. No amount of currency tomfoolery would make that practice profitable or wise.

 

Anyway, on point about exporting U.S. inflation: because we're trying to devalue our own currency, the Chinese must inflate their own currency to maintain the peg. They're now inflating to the point that prices are rising on the mainland, which is upsetting the central government. We don't really care, because the only thing that's happening from our standpoint is that the fat margins of importing Chinese goods are getting squeezed. Expect prices at Walmart to rise a bit, though.

I have seen data stating that it takes about 150,000 to 200,000 in employment growth for the economy to just break even each month. Definitely a step in the right direction, double that number and we might actually start making a small dent in the overall employment needs.

 

Private-sector employment up 93,000: ADP

November’s payroll increase represents largest gain in three years

 

"While November’s report shows an acceleration in employment, larger gains would be needed to lower the unemployment rate of 9.6%, according to Joel Prakken, chairman of Macroeconomic Advisers, which computes that data using anonymous payroll data collected by ADP."

http://www.marketwatch.com/story/private-sector-employment-up-93000-adp-2010-12-01

Does this count seasonal hiring of retailers to deal with the Christmas rush?

Does this count seasonal hiring of retailers to deal with the Christmas rush?

 

Yes. This is clearly not some great number, but its a lot better than last years November ADP numbers (-169,000). One item that has been lost in the headlines and may end up being a 'bell weather' for the start of 2011 was:

 

"Job cuts on the horizon: Employers announced plans to reduce payrolls by 48,711 jobs last month, according to Challenger, Gray & Christmas, a Chicago-based outplacement firm (see correction below). The figure was up 28% from October, but down 3.3% compared with November 2009."

http://finance.yahoo.com/news/Private-sector-employment-cnnm-2875758933.html?x=0&sec=topStories&pos=9&asset=&ccode=

I just want to get rid of the 'too big to fail' category altogether.  But, how much did TARP really add to the debt?  I understand the principled argument.  However, my understanding is that most of that money has been paid back.

 

Here is a little more on just how much debt the FEDs (taxpayer) has taken on. What the banks gave us in return was 'paper' that was not even close to being worth a $1 for a $1. TARP was a drop in the bucket.

 

Fed to Release Emergency Lending Details, Sanders Says

 

"The U.S. Federal Reserve is expected Wednesday to release data on financial institutions and foreign central banks to which it made more than $2 trillion in emergency loans during the financial crisis, according to a U.S. senator who has long been pushing the Fed to be more transparent in its actions."

http://blogs.wsj.com/economics/2010/11/30/fed-to-release-details-on-lending-programs-wednesday/

 

As far as payback for these 'loans' go. No such luck and I am sure we will not see most of this money paid back any time soon, if ever. Payback is going to be all that worthless or devalued 'paper' (assets) they gave as collatoral for the loans.

 

Fed Details Emergency Lending

 

"While some of the programs have been wound down as the health of financial markets improved, the Fed still holds most of the assets it took on during the crisis. As of Nov. 17, the Fed had $2.3 trillion in assets."

http://blogs.wsj.com/economics/2010/12/01/fed-to-detail-emergency-lending/

 

If TARP and these emergency financial loans weren't enought (about $3 Trillion) the taxpayer has also taken on Billions+ more in debt as we increase our amount of bad housing loans from the banks through Fannie and Freddie and these two continue to bleed by the billions.

 

I think you can safely say the taxpayer of the US has taken on $3.5 to $4 Trillion in debt through this mess. Maybe even higher and there is no way a lot of this will ever pay itself back. The transfer of wealth and debt over the last few years is STUNNING.

I just want to get rid of the 'too big to fail' category altogether.  But, how much did TARP really add to the debt?  I understand the principled argument.  However, my understanding is that most of that money has been paid back.

 

Here is a little more on just how much debt the FEDs (taxpayer) has taken on. What the banks gave us in return was 'paper' that was not even close to being worth a $1 for a $1. TARP was a drop in the bucket.

 

Fed to Release Emergency Lending Details, Sanders Says

 

"The U.S. Federal Reserve is expected Wednesday to release data on financial institutions and foreign central banks to which it made more than $2 trillion in emergency loans during the financial crisis, according to a U.S. senator who has long been pushing the Fed to be more transparent in its actions."

http://blogs.wsj.com/economics/2010/11/30/fed-to-release-details-on-lending-programs-wednesday/

 

As far as payback for these 'loans' go. No such luck and I am sure we will not see most of this money paid back any time soon, if ever. Payback is going to be all that worthless or devalued 'paper' (assets) they gave as collatoral for the loans.

 

Fed Details Emergency Lending

 

"While some of the programs have been wound down as the health of financial markets improved, the Fed still holds most of the assets it took on during the crisis. As of Nov. 17, the Fed had $2.3 trillion in assets."

http://blogs.wsj.com/economics/2010/12/01/fed-to-detail-emergency-lending/

 

If TARP and these emergency financial loans weren't enought (about $3 Trillion) the taxpayer has also taken on Billions+ more in debt as we increase our amount of bad housing loans from the banks through Fannie and Freddie and these two continue to bleed by the billions.

 

I think you can safely say the taxpayer of the US has taken on $3.5 to $4 Trillion in debt through this mess. Maybe even higher and there is no way a lot of this will ever pay itself back. The transfer of wealth and debt over the last few years is STUNNING.

 

I think this is terribly misleading. Maybe this is the extreme-right version. Here's a version for the rest of us.

 

"The disclosure, which was mandated by the Dodd-Frank financial overhaul law signed by President Obama in July, offers details about the $3 trillion in liquidity that the Fed provided to investment banks, foreign central banks and a number of other institutions."

 

". . .benefited from a program that supported the market for commercial paper — the short-term i.o.u.’s that corporations rely upon to make payroll and pay their suppliers. During the worst moments of the crisis, in the fall of 2008, even creditworthy corporate borrowers found this source of financing had dried up, and had to turn to the Fed for help."

 

"The Fed, which took months to compile the data and release it in electronic form by the Dec. 1 deadline, emphasized that most of the programs closed earlier this year and that taxpayers did not incur losses."

 

And it goes on to explain how terrible things truly were. But I'm sure will fall on deaf ears for a certain segment of the (backwards)population. Looking forward to the "End the Fed" chants

 

http://www.nytimes.com/2010/12/02/business/economy/02fed.html?_r=1&hpw

Weren't there two qualitatively different things that the Fed was doing, though?  It was ...

 

(1) providing emergency lending; and

 

(2) actually buying toxic assets.

 

I find plausible that the U.S. taxpayer did not take any losses on emergency short-term lending.  That kind of commercial paper is considered very safe, and despite one isolated incident in which a money market fund broke the buck a year or two ago, it really remained pretty safe even through the credit crisis.  I don't know the extent to which the Fed's actions were truly emergency short-term lending, i.e., stepping in to fill a void in the commercial paper market, but to the extent that the Fed took such actions, I'm willing to believe that it didn't take much of a loss on that score.

 

I find far less plausible the notion that we didn't take a loss on some of the toxic assets that the Fed either bought or guaranteed in connection with the bank bailouts.

I just want to get rid of the 'too big to fail' category altogether.  But, how much did TARP really add to the debt?  I understand the principled argument.  However, my understanding is that most of that money has been paid back.

 

Here is a little more on just how much debt the FEDs (taxpayer) has taken on. What the banks gave us in return was 'paper' that was not even close to being worth a $1 for a $1. TARP was a drop in the bucket.

 

Fed to Release Emergency Lending Details, Sanders Says

 

"The U.S. Federal Reserve is expected Wednesday to release data on financial institutions and foreign central banks to which it made more than $2 trillion in emergency loans during the financial crisis, according to a U.S. senator who has long been pushing the Fed to be more transparent in its actions."

http://blogs.wsj.com/economics/2010/11/30/fed-to-release-details-on-lending-programs-wednesday/

 

As far as payback for these 'loans' go. No such luck and I am sure we will not see most of this money paid back any time soon, if ever. Payback is going to be all that worthless or devalued 'paper' (assets) they gave as collatoral for the loans.

 

Fed Details Emergency Lending

 

"While some of the programs have been wound down as the health of financial markets improved, the Fed still holds most of the assets it took on during the crisis. As of Nov. 17, the Fed had $2.3 trillion in assets."

http://blogs.wsj.com/economics/2010/12/01/fed-to-detail-emergency-lending/

 

If TARP and these emergency financial loans weren't enought (about $3 Trillion) the taxpayer has also taken on Billions+ more in debt as we increase our amount of bad housing loans from the banks through Fannie and Freddie and these two continue to bleed by the billions.

 

I think you can safely say the taxpayer of the US has taken on $3.5 to $4 Trillion in debt through this mess. Maybe even higher and there is no way a lot of this will ever pay itself back. The transfer of wealth and debt over the last few years is STUNNING.

 

I think this is terribly misleading. Maybe this is the extreme-right version. Here's a version for the rest of us.

 

"The disclosure, which was mandated by the Dodd-Frank financial overhaul law signed by President Obama in July, offers details about the $3 trillion in liquidity that the Fed provided to investment banks, foreign central banks and a number of other institutions."

 

". . .benefited from a program that supported the market for commercial paper — the short-term i.o.u.’s that corporations rely upon to make payroll and pay their suppliers. During the worst moments of the crisis, in the fall of 2008, even creditworthy corporate borrowers found this source of financing had dried up, and had to turn to the Fed for help."

 

"The Fed, which took months to compile the data and release it in electronic form by the Dec. 1 deadline, emphasized that most of the programs closed earlier this year and that taxpayers did not incur losses."

 

And it goes on to explain how terrible things truly were. But I'm sure will fall on deaf ears for a certain segment of the (backwards)population. Looking forward to the "End the Fed" chants

 

http://www.nytimes.com/2010/12/02/business/economy/02fed.html?_r=1&hpw

 

So why is the FED still holding most of the assets it took on during the crisis? ($2.3 trillion) If the assets are good and worth a $1 for a $1, then why have the financial institutions not taken back their assets, since the emergency is over?

 

Or, maybe between November 17th and November 30th the FED received $2.3 trillion? If not then only $700,000 billion has been returned with no losses, I wonder what it keeping the financial institution from collecting the rest of their $2.3 trillion in valuables?

^Originally expected to cost the U.S. Government $356 billion, the most recent final net estimate of the cost, as of October 5, 2010, will be close to $30 billion, including expected returns from interest in AIG. This is significantly less than the taxpayers' cost of the savings and loan crisis of the late 1980s. The cost of that crisis amounted to 3.2% of GDP during the Reagan/Bush era, while the GDP percentage of the current crisis' cost is estimated at less than 1%.

 

While it was once feared the government would be holding companies like GM, AIG and Citigroup for several years, those companies are preparing to buy back the Treasury's stake and emerge from TARP within a year. Of the $245 billion invested in U.S. banks, over $169 billion has been paid back, including $13.7 billion in dividends, interest and other income, along with $4 billion in warrant proceeds as of April 2010. AIG is considered "on track" to pay back $51 billion from divestitures of two units and another $32 billion in securities.

 

In March 2010, GM repaid more than $2 billion to the U.S. and Canadian governments and on April 21 GM announced the entire loan portion of the U.S. and Canadian governments' investments had been paid back in full, with interest, for a total of $8.1 billion. This was, however, subject to contention because it was argued that the automaker simply shuffled federal bailout funds to pay back taxpayers.

^Originally expected to cost the U.S. Government $356 billion, the most recent final net estimate of the cost, as of October 5, 2010, will be close to $30 billion, including expected returns from interest in AIG. This is significantly less than the taxpayers' cost of the savings and loan crisis of the late 1980s. The cost of that crisis amounted to 3.2% of GDP during the Reagan/Bush era, while the GDP percentage of the current crisis' cost is estimated at less than 1%.

 

While it was once feared the government would be holding companies like GM, AIG and Citigroup for several years, those companies are preparing to buy back the Treasury's stake and emerge from TARP within a year. Of the $245 billion invested in U.S. banks, over $169 billion has been paid back, including $13.7 billion in dividends, interest and other income, along with $4 billion in warrant proceeds as of April 2010. AIG is considered "on track" to pay back $51 billion from divestitures of two units and another $32 billion in securities.

 

In March 2010, GM repaid more than $2 billion to the U.S. and Canadian governments and on April 21 GM announced the entire loan portion of the U.S. and Canadian governments' investments had been paid back in full, with interest, for a total of $8.1 billion. This was, however, subject to contention because it was argued that the automaker simply shuffled federal bailout funds to pay back taxpayers.

 

Thanks for the info on TARP. I think we all have agreed that TARP has not been the problem. The problem is the 'emergency loans' that had bad paper as their asset and the huge amount of debt fannie and freddie have/are taking on with bad loans from the banks. These two items make TARP look small.

I assume you mean the $3 trillion plus in 'emergency loans' the Fed loaned to lending institutions between 2007 and July 2010?  Or at least that is one of the items you are citing as a problem.

 

These were lending programs specifically targeted to keep the flow of credit moving through the credit crisis.  Most of the loans were to major financial institutions such as BOA, JP Morgan, Citigroup and Wells Fargo, as well as foreign banks such as Deutche Bank, Barclays, etc.  Regardless of how they were secured, most of these loans have been paid back and none are overdue.  At least that it what was reported in whatever story I read today on the subject.  These lending programs were absolutely vital to many, many small businesses during the financial crisis

 

Then, I believe, there was another $1 trillion in mortgage securities the Fed bought from F&F.  I am not sure how I feel about that.  It all comes down to how vital you feel the housing market is (or should be) to our economy.