it's kinda like FDR's fireside chats, but delivered by a thug

[sophiaserpentia]

If the big bank bailout was a step in the direction of socialism, i'm not even sure how to blithely characterize this new plank in the Bush Administration's strategery:

An impatient White House served notice Tuesday on banks and other financial companies receiving billions of dollars in federal help to quit hoarding the money and start making more loans.

"We're trying to do is get banks to do what they are supposed to do, which is support the system that we have in America. And banks exist to lend money," White House press secretary Dana Perino said. Though there are limits on how much Washington can pressure banks, she noted that banks are regulated by the federal government. "They will be watching very closely, and they're working with the banks," she said.

White House to banks: Start lending money

Today's bright idea? "The beatings will continue until morale improves."

The White House literally believed that the banks would take the bailout money and do exactly the same as they did before the bubble burst. Is that really what the money was for?

There's so much wrong with this i don't even know where to begin. "The system that we have in America" is supposedly a free country where people choose -- as in "willingly," "by consent" -- whether or not to take risks with their money. Could the White House have any more plainly said that this way of doing things is now over?

It's part of a larger pattern, by which the Republicans (1) say over and over that government is the problem, not the solution, so when they are in power they do their best to screw things up, and (2) have been consistently saying things that escalate rather than de-escalate the fear and tension in society.

Comments

[stacymckenna.livejournal.com]

Is that really what the money was for?
YES.

Again, I highly recommend "Money As Debt" for why this solution would make sense to them...

[lassiter.livejournal.com]

Well, not quite. The immediate issue was a drying up of interbank loans and short-term loans to businesses. But as sages like Nouriel Roubini have pointed out, pumping massive liquidity into the system (as the bailout bill did) does nothing to start credit moving again. The credit halt is due to the fact that no lending institution currently trusts the others, because of the massive across-the-board exposure in credit default swaps and other "off the books" derivatives. Without a top-down government mandate of full transparency (which would mean that a lot of lending institutions would, in fact, have to declare bankruptcy), the flow of credit cannot resume because no one can be assured of being paid back.

So all the bipartisan bailout bill did was pump mostly unneeded surplus liquidity into a system that generally didn't have a liquidity problem. So of course those institutions are going to use the government's largesse for more mischief.

What rarely gets mentioned in all this is that the current collapse of dominoes was triggered by the Fed's and US treasury's refusal to bail out Lehman Brothers. Well, that gets mentioned, but it;s apparently considered impolite to note that both the Fed and the Treasury are controlled by ("former") executives of Lehman's chief competitor, Goldman Sachs. So the entire crisis was precipitated as an attempt by Goldman-Sachs loyalists to allow their competition to go under. Not that it wouldn't have happened anyway, but isn't this the kind of stuff that Congress should be holding hearings on?

[sophiaserpentia.livejournal.com]

Sorry, i was editing the post as you wrote this comment.

Hmm, i recall seeing former Lehman Brother's CEO Fuld telling a congressional panel that "to [his] dying day" he would wonder why the Fed allowed Lehman to fall. Congress *did* hold hearings and they were right there at the crux of the issue... and didn't press that little bit farther.

I love Jon Stewart's response to Alan Greenspan saying there was a flaw in his model of how the world works: the one thing he left out was just how douche-y people are.

[lassiter.livejournal.com]

Congress *did* hold hearings and they were right there at the crux of the issue... and didn't press that little bit farther.

Are we cynical enough to think it's because Goldman Sachs beat out Lehman Bros. in the bidding war for Chris Dodd's affection? Oooh- and just look at the love shown by AIG to the chair of the Senate Banking Committee.

[sophiaserpentia.livejournal.com]

Are we cynical enough to think it's because Goldman Sachs beat out Lehman Bros. in the bidding war for Chris Dodd's affection?

I dunno about that in particular (it's not a large difference and $68K is still a lot of luv), but i am certainly cynical enough to think that the issue was deliberately framed out-of-bounds. Maybe it's something more like, the Democrats are willing to sacrifice the soundness of America's economy and banking system to maximize the amount of damage attributed to the Republicans.

[lassiter.livejournal.com]

Not sure if that works as a strategy, since a fair number of people probably remember that the Senate Democrats and Bush (both way up in the "unpopular" category) were pushing the bill while a majority of Republicans stood firm against it.

If the economic troubles work in the Dems' favor, it's because the trend of falling real wages and rising prices (especially for food and health care) has become too clear for ordinary Americans to ignore. I'd think the bailout itself hurts the Dems somewhat, but probably not enough to swing the race at this point.

[sophiaserpentia.livejournal.com]

I think, though, that it explains a lot of what the Democrats have been doing the last two years. Why else would they allow the Republicans to stymie so many bills? I mean, all they had to do was say, "Okay, you guys have abused the rule of cloture, so we're revoking it for the rest of this session, have fun blabbing away on C-SPAN." I think, honestly, that they wanted to have it so that hardly anything could be pinned on them. The bailout is pretty much it.

[jimkeller.livejournal.com]

And this is exactly why economists all over the country were saying the bailouts wouldn't work. They were the equivalent of giving someone in a body cast after a car accident the keys to a new car, and wondering why he won't drive it...