Friday, April 10, 2009

Bizarre Twist

In the latest bizarre twist to the sordid saga of elite bankers slavering at the public coffers, the banks are planning to use the latest Obama/Geithner bailout money to repurchase the same toxic assets they are getting rid of. Well, maybe not the very same ones, but the same type for sure.

It’s not hard to understand why they might be doing that. Many of those assets are now close to worthless. The plan includes a competitive bidding process that supposedly would give a true value to the assets, but since nearly all losses will be socialized and gains privatized, they will tend to bid high. After they are bought back the former toxic trash will come with a government guarantee. How convenient.

Personally, before I gave the banks another trillion dollars I’d kind of like to know what they did with the trillions they’ve already gotten, but, seemingly, that’s too much to ask of them so we’ll just have to trust they’re doing the right thing. They’re really smart and they certainly have the best interests of the country at heart so why would we want to press them on where the money is going. Just because the US government is majority owner of those banks doesn’t mean it is clever enough to rescue them. No it’s only the idiot (oops, brilliant) bankers who understand how to make everything peachy-keen again.

And we certainly wouldn’t want to place restrictions on executive pay for bailout receivers, else they might not be willing to join the program. If they can’t get their exorbitant (oops, entirely justified) compensation they just might let their firms fail and then where would we be?

After repeated badgering by a pesky congressman, AIG finally opened up on where some of its $173 billion bailout went. What a mistake, better not to know that, for instance, six billion plus went to Societe General, France’s largest bank, another six billion plus went to Deutche Bank, Germany’s largest, and that billions more went to Barclay’s and UBS and other foreign institutions, not to mention a mountain of cash to America’s biggest banks. Knowing that would only get people angry and irate and that might lead to protests and demonstrations and result in those bailout funds being cut off and then we’d really be in trouble. No, better not to know, better to trust the smart guys.

While we might want to regulate hedge funds and derivatives and clamp down on tax havens we wouldn’t want to reinstitute the separation between retail banks where Average Sally keeps her checking account and investment banks which are purely speculative. Even though it worked mighty fine from the thirties until 1998 when the smart guys, including Geithner and Summers and others on Obama’s economic team, had the banking system deregulated, it’s not in Obama’s plans today.

Unfortunately, I can’t think of one glib, sarcastic thing to say about why the separation should not be reinstituted; but then maybe I’m not smart enough. Separation would preclude the banks buying back their toxic assets in guaranteed form as mentioned in the beginning of this rant. Maybe somebody out there has a handle on why that’s not included in Obama’s financial regulation plans. Beats me.

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