February 13, 2009, 8:50 a.m.
Understandable -- and Productive -- "Public Anger"
(brought to you by FromDC2Iowa.blogspot.com*)
After eight years of hunting, America's top intelligence and law enforcement agencies have finally found the most deadly terrorists threatening our nation's national security.
Who are they?
Bankers.
I'm not kidding. Read on.
There's been an almost "boys will be boys" reaction in Washington to the destruction of the American economy by those very generous campaign contributors who call themselves "masters of the universe." Few have been removed from power or had their pay cut, none (to my knowledge) has been required to pay back any of their past obscenely large and ill-gotten gains, and a statistically insignificant number have even apologized for the harm they've caused -- let alone been prosecuted and sent to prison.
There are undoubtedly "a few good apples" somewhere in that rotten barrel, but they are few and far between.
For the most part, those whose incompetence, irresponsibility, immorality, criminality and greed have created widespread hardship on the American people (and much of the rest of the world) have been very slow to "get it." "Why do they hate us?" they seem to be asking from the comforts of their $1 million redecorated offices, $50 million private jets, and posh resort retreats.
Well, now that "public anger" has become a political force of some consequence at least some of our elected officials (to whom these guys must come for more trillions of our taxpayer dollars) are trying to explain it to some of their most generous contributors.
"'Alleviating that public anger, not with mumbo jumbo but with reality, is essential if we’re going to have the support of the country,' House Financial Services Committee Chairman Barney Frank said today at a hearing in Washington," speaking to eight CEOs of some of the nation's largest banks. Alison Vekshin, "Congress Tells Bank Chiefs to Lend, Ease Public Anger," Bloomberg, February 11, 2009.
At long last we may now have even more basis for our "public anger" and a sense of accomplishment for expressing it.
No more "boys will be boys."
Dennis C. Blair, our new intelligence czar (Director of National Intelligence), speaking for the federal government's "intelligence community" has just told the Senate Intelligence Committee that the wreckage caused by our nation's irresponsible, selfish CEOs has now "outpaced terrorism as the most urgent threat facing the United States" (excerpts from the Times' February 13 story below).
Apparently the FBI agrees. "With thousands of [corporate and "an even bigger mountain of" mortgage] fraud investigations under way [including "some of the biggest names in corporate finance"], the FBI is considering shifting agents away from counterterrorism work to help sort through the wreckage of the financial meltdown. . . ." (more excerpts from the Bloomberg report below).
Perhaps our elected officials -- who quickly spring to action with trillions for the nation's bankers, but tell us it will be "a few weeks" before they will be able to focus on the human carnage those bankers have caused among the officials' constituents -- will be willing to give a little more attention to prosecuting these terrorists and criminals among us, normally very handy and popular targets for politicians, now that they have been identified as such by the intelligence and crime fighting agencies of our government.
Watch this space. Let's see.
Here are excerpts from the referenced stories:
Mark Mazzetti, "Global Economy Top Threat to U.S., Spy Chief Says," New York Times, February 13, 2009
The new director of national intelligence told Congress on Thursday that global economic turmoil and the instability it could ignite had outpaced terrorism as the most urgent threat facing the United States.
The assessment underscored concern inside America’s intelligence agencies not only about the fallout from the economic crisis around the globe, but also about long-term harm to America’s reputation. The crisis that began in American markets has already “increased questioning of U.S. stewardship of the global economy,” the intelligence chief, Dennis C. Blair, said in prepared testimony.
Mr. Blair’s comments were particularly striking because they were delivered as part of a threat assessment to Congress that has customarily focused on issues like terrorism and nuclear proliferation. Mr. Blair singled out the economic downturn as “the primary near-term security concern” for the country, and he warned that if it continued to spread and deepen, it would contribute to unrest and imperil some governments.
“The longer it takes for the recovery to begin, the greater the likelihood of serious damage to U.S. strategic interests,” he said. . . .
Mr. Blair delivered his assessment to the Senate Intelligence Committee, in what was the new administration’s first public recitation of the national security challenges facing the United States. . . .
Mr. Blair’s focus on the world economy was a surprise to some senators. . . ."
Devlin Barrett, "FBI may shift counterterror agents to anti-fraud," Associated Press/Yahoo! News, February 11, 2009:
With thousands of fraud investigations under way, the FBI is considering shifting agents away from counterterrorism work to help sort through the wreckage of the financial meltdown. . . .
[FBI Deputy Director John] Pistole told Congress his investigators have 530 active corporate fraud investigations, and 38 of them involve some of the biggest names in corporate finance — cases directly related to the current crisis.
In addition, FBI investigators are tackling an even bigger mountain of mortgage fraud cases in which hundreds of millions of dollars may have been swindled . . . more than double the number of such cases just two years ago . . . industry professionals generating fraud schemes that could total as much as hundreds of millions of dollars . . . 'lawyers, brokers or real estate professionals . . . systematically trying to defraud the system,' Pistole said . . . [including] some instances of organized crime getting involved in mortgage fraud . . ..
"If You Can't Trust Your Banker . . ."
[Credit: "Shady Deal at Sunny Acres," Maverick, 2nd Season, 1958. The popular early television series, Maverick, "starring James Garner and Jack Kelly, remains the most famous and widely discussed episode of the Western comedy television series Maverick. Written by Roy Huggins and Douglas Heyes and directed by Leslie H. Martinson, this 1958 second season episode depicts gambler Bret Maverick (James Garner) being swindled by a crooked banker (John Dehner) after depositing the proceeds from a late-night poker game, then recruiting his brother Bart Maverick (Jack Kelly) to mount an elaborate sting operation to recover the money." It's also the source of two oft-quoted lines: "If you can't trust your banker, whom can you trust?" and "I'm working on it." See, "Shady Deal at Sunny Acres," wikipedia.org.]
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Related Blog Entries on Global Economy and Bailouts
Nicholas Johnson, "Who's The Reason?" September 5, 2008
Nicholas Johnson, "How Much Do You Owe the Chinese?" September 6, 2008
Nicholas Johnson, "Taxpayer Rescue," September 15, 2008
Nicholas Johnson, "Global Finance: The Great Fountain Pen Robbery," September 21, 2008
Nicholas Johnson, "Alternatives to 'The Plan,'" September 28, 2008
Nicholas Johnson, "Better Alternatives to Congress' Bailout Plan," October 2, 2008
Nicholas Johnson, "Can We Trust Our Bankers?" October 29, 2008
Nicholas Johnson, "It's the Economy," November 7, 2008
Nicholas Johnson, "Jobs, Not Unemployment, Key to Recovery," November 8, 2008
Nicholas Johnson, "Trust Your Instincts, Auto Bailout's Terrible Idea," November 14, 2008
Nicholas Johnson, "Auto Bailout: An Open Letter to Congress," November 19, 2008
Nicholas Johnson, "A Trillion Here, a Trillion There," November 20, 2008
Nicholas Johnson, "FromDC2Iowa's Weekend Edition," November 21, 2008 ("The Answer to Global Economic Collapse" and "Auto Bailout: 'Show Me the . . . Plan'")
Nicholas Johnson, "Citigroup Deal Stinks," November 25, 2008
Nicholas Johnson, "Only Select Few Are Thankful for Trillions," November 27, 2008
Nicholas Johnson, "Auto Loan Makes Too Few Dollars Even Less Sense," December 4, 2008
Nicholas Johnson,"Quick Fix for the Economy," December 12, 2008
Nicholas Johnson, "You Know It's Serious When We Start Laughing," December 15, 2008
Nicholas Johnson, "A Car in Every Garage," December 16, 2008
Nicholas Johnson, "Forget Madoff, Focus on Bernanke," December 17, 2008
Nicholas Johnson, "Of Theaters and Automobiles," December 20, 2008
Nicholas Johnson, "There's Bad News and . . . and . . .," December 21, 2008
Nicholas Johnson, "Et Tu, Toyota?" December 22, 2008
Nicholas Johnson, "Revolting Developments," December 23, 2008
Nicholas Johnson, "First Things First," January 8, 2009
Nicholas Johnson, "Why We Should 'Point Fingers' and 'Look Backwards,'" January 13, 2009
Nicholas Johnson, "Fool Me Twice," January 14, 2009
Nicholas Johnson, "Economic Sorrows and Solutions," January 27, 2009
Nicholas Johnson, "No More for Wall Street!" February 1, 2009
Nicholas Johnson, "Hang Onto Your Wallet," February 5, 2009
Nicholas Johnson, "Quick Fix: Support Jobless, Not Bankers," February 7, 2009
Nicholas Johnson, "Geithner's Same Old, Same Old," February 10, 2009
Nicholas Johnson, "Terrorist Bankers," February 13, 2009
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* Why do I put this blog ID at the top of the entry, when you know full well what blog you're reading? Because there are a number of Internet sites that, for whatever reason, simply take the blog entries of others and reproduce them as their own without crediting the source. I don't mind the flattering attention, but would appreciate acknowledgment as the source -- even if I have to embed it myself. -- Nicholas Johnson
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January 14, 2009, 8:10 a.m.
"Fool Me Twice, Shame on Me"
(Brought to you by FromDC2Iowa.blogspot.com*)
We're going to look back on the current rush to provide the second $350 billion to the banking industry as a tragic, tragic, mistake. Mark my words.
And not just my words, but those of the World Economic Forum -- an organization of some of the, as the name suggests, world's most influential economists and corporate CEOs -- the very folks you'd expect to be enthusiastic about gifts of billions from grateful taxpayers.
Don't get me wrong. I'm not going to delight in saying "I told you so" sometime on down the road. My most fervent wish is that I'll be saying "well, I sure got that one backwards." But I fear I'm right.
The following assertions are those of someone who is neither ideologue nor academic economist. I'm just an ordinary citizen taxpayer, hopefully with some common sense and a small dollop of cynicism, who tries to learn from experience. Like Will Rogers, "all I know is what I read in the papers;" it's just that my newspaper reading isn't limited to American papers.
This is not an argument for the proposition that a trillion-plus bailout of the banking, financial, investment and real estate mortgage industries would never be beneficial at some time, under some circumstances, for some individuals and businesses -- only that it is very, very wrong to do it at this time, under these circumstances, for these individuals and businesses.
Why?
1. They caused the problem. It seems fairly clear that our dire economic circumstances are the result of individuals' decisions -- whether the consequence of abysmal ignorance or cynical and selfish greed. They are not the result of "acts of God," only the acts of executives who thought themselves to be God. That makes them undeserving of bailouts. But who cares about that if by giving these undeserving millionaires hundreds of billions of dollars our economy turns around, the currently unemployed get jobs, and evicted former homeowners are back in their houses?
2. It didn't work. Many, including this blog, predicted that the $700 billion bailout wouldn't produce jobs, put folks back in their homes, and boost the economy. Those were just guesses, even if those who offered those warnings turned out to be right. Now there are more than guesses. There is data; the results of the first $350 billion are known. Unemployment is up; the economy has continued to spiral down. Knowing that it didn't work the first time, why would we try it a second.
3. The recipients have proven they aren't trustworthy. Sure, the Congress and Treasury Secretary Henry Paulson screwed up big time. But the recipients knew what the money was for, and it wasn't for squirreling away to increase reserves, buying other banks, dividends, and executive bonuses. Having created the problem by putting their own selfish greed ahead of the public interest, we should not be surprised that, given the opportunity, they would be inclined to keep the money rather than let those billions of dollars slip through their fingers and "trickle down" to their desperate neighbors. But OK, so they fooled us once. Now why are we setting ourselves up to be fooled again? Are these really the best guys to trust with another addition to a national debt we're leaving to our grandchildren?
(For details regarding how banks are using taxpayers' money in fact, as distinguished from theory and intention -- along with criticisms similar to my own and those of the World Economic Forum regarding the bailout approach -- see the excerpts from a story in today's [January 14] New York Times at the bottom of this blog entry: "In Michigan, Bank Lends Little of Its Bailout Funds.")
4. Stop digging. "When you find yourself in a hole the first thing to do is to stop digging." Our economic problem is, in large measure, irresponsible levels of debt -- multi-trillion-dollar national debt, mortgages, student loans and credit card balances beyond our means. And just why is it that additional debt is the solution to our debt problem?
5. Conditions first, money second. Even if this were a wise and warranted strategy, and the recipients who let us down in the past were now paragons of virtue, what's the rush? "If you don't give me $350 billion by tomorrow the economy will collapse." We fell for that once. "Show me the money?" -- No, not until you show me the details, the business plan. What is it about economists and financiers and their three-page proposals for near-trillion-dollar expenditures? (Yes, like Henry Paulson, Larry Summers is also offering a three-page letter of explanation.) Who's getting this money? What are they required to do with it? What oversight will be provided? What if (again) they violate the conditions? What is a reasonable prediction, scenario, as to what is going to happen as a result of this additional national debt?
6. Exit strategy. President-elect Obama "intends to agree to Pentagon plans to send up to 30,000 more US troops to Afghanistan in order to gain time to review the conflict" -- rather than learning from the Russian experience there, and focus on designing an exit strategy. AFP, "Obama to review Afghan strategy, approve troop increase," January 13, 2009. Unfortunately, his current approach to the coming economic depression also lacks an "exit strategy" -- that is to say, a long term plan, reasonably rational on its face, that takes us beyond the current one more bailout at a time approach. Where are we headed? What are we doing and why? What is our long term strategy and how reasonable are we in thinking it will work? I don't get this from Obama, his team, or our congressional leaders.
Now here's the news, along with the World Economic Forum's concerns:
President-elect Barack Obama worked Capitol Hill, trying to persuade Democratic senators not to block a request for the last $350 billion of the bailout funds and assuring them that he is willing to use his veto power if they do so. . . . "[T]he bulk" of the remaining TARP rescue funds would be used to invest in banks and other financial institutions . . .. Many Senate Republicans, meanwhile, continued to insist that Obama's team has provided too few details about how they would use the money. Many said they are seeking a written statement detailing Obama's intentions that goes beyond the three-page letter submitted to congressional leaders Monday by Obama economic adviser Lawrence H. Summers. . . . "Members need to know how the Obama administration is going to carry out this bill -- and we need to know not just statements of principle, but what they are willing to bind themselves morally to do," said Brad Sherman (D-Calif.).
Obama is making personal calls to Democrats and Republicans to urge them to release the money, and Democratic leaders were confident that he would prevail on a matter he told them he considers the "first vote" of his administration.
Neil Irwin and David Cho, "Fed Backs Obama's Bailout Request," Washington Post, January 14, 2009, p. A1.
To the extent there are any details, they are not encouraging. The AP reports, "Frank's bill would require $40 billion to $100 billion of the bailout money to be spent on mitigating foreclosures [$40 billion is scarcely 10% of the funds] and . . . require the Treasury Department to use nonbailout resources to increase demand for home purchases [even though, while appealing to realtors and bankers, purchasing a home now is the furthest thing from the minds of those who've just been thrown out of the home they thought they had]." (comments added) AP, "Highlights of New Bailout Proposals," January 13, 2009.
And, "Bank executives will get to fly their company jets after all. Financial institutions that get assistance through the $700-billion Troubled Asset Relief Program had faced a provision that recipients of the money would be prohibited from owning or leasing private aircraft. But Kansas is one of the nation's centers of aircraft manufacturing, and state lawmakers complained . . .. So yesterday, Barney Frank (D-Mass.), head of the House Financial Services Committee and the author of the bill, lifted the jet ban." AP, "Ban on Private Jets Lifted from Bailout Program," Newsday, January 14, 2009.
Meanwhile, the prestigious World Economic Forum is warning that government spending, and lack of long range planning, not only contains the possibility of doing little or no good, it may even "backfire" and end up doing considerable harm:
The World Economic Forum took a grim view of prospects for the world economy this year in a report released Tuesday, warning that government spending to counter the financial crisis could backfire. . . .
But the crux of the report was a prediction that "massive" government spending to support ailing financial institutions hit by the credit crisis could sow the seeds of more problems in the future.
Although it has been widely advocated, such spending is set to fuel big deficits in several major economies including Australia, Britain, France and the United States, WEF's "Global Risks 2009" report said.
"One of the biggest risks is that short-term crisis fighting may induce businesses and governments to lose the long term perspective on risk," said one of the contributors, Daniel Hofmann, chief economist for insurer Zurich Financial Services.
Agence France-Presse, "World Economic Forum Warns Government Bailouts Could Backfire," ABS CBN News, January 13, 2008.
Although I cannot yet find a copy of the organization's Global Risks 2009 report online, it has been providing similar warnings for years. See Global Risks 2008: A Global Risk Network Report, World Economic Forum, January 2008, and the earlier reports from January 2007 and 2006.
I hold out little hope that the industries containing some of America's most generous campaign contributors will not get their $350 billion -- and even less that it will do much good for those 305 million Americans who have taken the losses, and are bearing the hardship of the consequences of their selfish, irresponsible greed.
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Excerpts from "In Michigan, Bank Lends Little of Its Bailout Funds":
The Treasury Department has invested $72 million out of the $700 billion in federal bailout funds to help prop up this community bank [Independent Bank of Michigan] . . ..
But Independent . . . is not doing much lending these days. So far it is using all of the government’s money to shore up its own weak finances by repaying short-term loans from the Federal Reserve. . . .
This is not what the Treasury Department had in mind when it started this program, saying it would give the nation’s “healthy banks” enough money to start lending again, so that people could buy homes and businesses could invest and create jobs, thereby invigorating a disintegrating economy. . . .
As of Tuesday, 257 financial institutions in 42 states had received $192 billion in capital injections from the Treasury’s Troubled Asset Relief Program, or TARP, out of $250 billion set aside for this purpose. Seven giant banks — like JPMorgan Chase and Citigroup — have received more than 62 percent of the total so far, and have gotten most of the attention. . . .
Economists say the decision by banks like Independent to use the federal money for purposes other than lending, while perhaps disappointing, is not surprising, given that the Treasury Department did not honor its plan to give the money only to healthy banks.
“It’s a matter of logic — when you are in a perilous position, like many of them are, you try to bolster your balance sheet,” said Alan S. Blinder, a monetary policy economics professor at Princeton. “But this is a real flaw in the program.”
Some banking experts are even questioning if the bailout may be doing more harm than good, in some cases, by giving banks like Independent a cushion as they struggle to fix their problems, rather than forcing them to sink or swim on their own. It could also delay mergers of weaker banks with healthier ones.
“You are keeping a lot of troubled institutions in kind of a status quo state,” said Eric D. Hovde, the chief executive of a Washington-based hedge fund that invests in the banking industry. “They can continue on their merry ways.” In Congress, anger over the management of the TARP program runs deep. Many lawmakers say that there is little oversight, and that they can see no evidence that the taxpayer money is making its way from the coffers of banks to businesses and consumers. . . .
Some lawmakers have criticized the Treasury for allowing banks to use the government’s bailout money to acquire rival banks. . . .
“A lot of the money is already out there and the inspector general needs to get up to speed on how banks are using it,” said Senator Claire McCaskill, Democrat of Missouri. “We need to make sure we get this money back and the only way we can do that is with strong oversight on how this money is spent.” . . .
Mr. [Eric D. Hovde] Hovde, the hedge fund investor who says he believes the bailout program is putting off judgment day for many banks, said his fear was that many of the banks would burn through their federal money only to face a squeeze again. And they will never have made the extra loans that the Treasury had hoped would jump-start the economy.
Eric Lipton and Ron Nixon, "In Michigan, Bank Lends Little of Its Bailout Funds," New York Times, January 14, 2009.
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* Why do I put this blog ID at the top of the entry, when you know full well what blog you're reading? Because there are a number of Internet sites that, for whatever reason, simply take the blog entries of others and reproduce them as their own without crediting the source. I don't mind the flattering attention, but would appreciate acknowledgment as the source -- even if I have to embed it myself.
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