The bank rescue - An Obama miracle.

[Sallow]

Written by a guy from the Bush administration, no less..

I remember the feeling of dismay at the seemingly half-baked plan while watching the speech with others at a New York City asset management firm where I was talking about the economy. The reaction of equity markets mirrored the unhappiness in that room, with stocks down more than 5 percent that day.

It turns out, however, that the program sketched out by Mr. Geithner both came to pass and made a difference. Five years later, the United States financial sector is in much better condition. Banks have absorbed losses from loans made during the bubble and rebuilt their capital, and investor confidence has returned. Mr. Geithner’s proposals did not all work right away or in the scale initially envisioned. In the end, however, Secretary Geithner deserves credit for making good on what he promised.

By far the most important component of Mr. Geithner’s proposal was a stress test to assess whether banks had “sufficient financial strength to absorb losses and to remain strongly capitalized” in the event of another severe downturn. Led by the Federal Reserve, the stress test involved coming up with forecasts of banks’ financial positions in the event of a hypothetical renewed recession and housing price collapse. Banks that could not make it through this very negative economic scenario would be given six months to raise capital from private investors, after which regulators would have pressed them to accept more TARP capital.

It is hard to remember, but back in the spring of 2009 many people believed that the United States government would nationalize large banks, starting with Citigroup and then moving on to Bank of America and perhaps others. Indeed, according to the New Yorker writer Ryan Lizza, this was a well-founded concern in the sense that nationalization was discussed as a policy option starting with Citigroup and then moving on to Bank of America and perhaps others. Indeed, according to the New Yorker writer Ryan Lizza, this was a well-founded concern in the sense that nationalization was discussed as a policy option by the Obama administration amid a swell of sentiment for this action among economists and columnists.
http://economix.blogs.nytimes.com/2...php=true&_type=blogs&partner=rss&emc=rss&_r=0

 

[Mac1958]

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It's been my observation that most people don't realize how close we came to a complete, abject collapse of our entire financial system. This is my profession, and there were a couple of days there in which I was -- and this not a term I use lightly -- seriously freakin' scared. I can even tell you exactly where I was standing when I said to myself, "oh fuck, this might be happening". The velocity of cash through the business banking system had locked up, literally.

The feds had explored every option, every idea. They had even looked for help from overseas but failed (the Brits saw what was happening and said "no thanks"). They knew they had probably blown it by letting Lehman Brothers go down, even though it was understandable that they did.

Gang, we were literally days, maybe hours away from crossing a line after which nothing could be done. I scream against government interference and influence all the time here, but there are exceptions to every rule. All we could do at that point was throw a massive amount of money at it, no matter how wasteful and bloated that strategy is, and hope for the best. The feds were the only entity that could do it.

It was do or die, folks, I'm not kidding.

Not everything is black or white, either/or. Fight too much government and its destructive effects, I'm with ya, but this had to be done.

.

 

[Sallow]

.

It's been my observation that most people don't realize how close we came to a complete, abject collapse of our entire financial system. This is my profession, and there were a couple of days there in which I was -- and this not a term I use lightly -- seriously freakin' scared. I can even tell you exactly where I was standing when I said to myself, "oh fuck, this might be happening". The velocity of cash through the business banking system had locked up, literally.

The feds had explored every option, every idea. They had even looked for help from overseas but failed (the Brits saw what was happening and said "no thanks"). They knew they had probably blown it by letting Lehman Brothers go down, even though it was understandable that they did.

Gang, we were literally days, maybe hours away from crossing a line after which nothing could be done. I scream against government interference and influence all the time here, but there are exceptions to every rule. All we could do at that point was throw a massive amount of money at it, no matter how wasteful and bloated that strategy is, and hope for the best. The feds were the only entity that could do it.

It was do or die, folks, I'm not kidding.

Not everything is black or white, either/or. Fight too much government and its destructive effects, I'm with ya, but this had to be done.

.

At the time I was working at the NYSE.

You really could feel the panic.

 

[ScienceRocks]

Obama saved this country but he needs to do a lot more to get us back to the innovator we were in the 1950, 1960s and 1970s...There's a lot of cave men but I can only hope we can do it.

 

[ScienceRocks]

To see that Obama is right look at China the past 20 years, Taiwan, South Korea, Germany, Briton...INVESTING and growing the economy is the way to do it!

There really isn't a nation that allows its private sector go crazy on this planet.

 

[occupied]

I pretty much lost everything in 2008-2009, banks and bankers make me furious and probably always will. The fact that the government had to bail them out while I was pretty much on my own and shit out of luck will color my politics for the rest of my life.

 

[Mac1958]

Obama saved this country but he needs to do a lot more to get us back to the innovator we were in the 1950, 1960s and 1970s...There's a lot of cave men but I can only hope we can do it.

Jeez Matthew, Obama didn't "save the country", come on.

It was a little more complicated than that.

Here's a nice, brief synopsis: http://www.theguardian.com/business/2008/dec/28/markets-credit-crunch-banking-2008

.

 

[Mac1958]

Obama saved this country but he needs to do a lot more to get us back to the innovator we were in the 1950, 1960s and 1970s...There's a lot of cave men but I can only hope we can do it.

I pretty much lost everything in 2008-2009, banks and bankers make me furious and probably always will. The fact that the government had to bail them out while I was pretty much on my own and shit out of luck will color my politics for the rest of my life.

The Meltdown was about far more than the banks. They were the biggest visible villain (and they were definitely a villain), but what happened was the predictable result of too much torque in the system, building and building over a long period of time.

The Meltdown was decades in the making, and it was cultural as much as economic.

.

 

[occupied]

Obama saved this country but he needs to do a lot more to get us back to the innovator we were in the 1950, 1960s and 1970s...There's a lot of cave men but I can only hope we can do it.

I pretty much lost everything in 2008-2009, banks and bankers make me furious and probably always will. The fact that the government had to bail them out while I was pretty much on my own and shit out of luck will color my politics for the rest of my life.

The Meltdown was about far more than the banks. They were the biggest visible villain (and they were definitely a villain), but what happened was the predictable result of too much torque in the system, building and building over a long period of time.

The Meltdown was decades in the making, and it was cultural as much as economic.

.

I did everything right and still lost. At the time I did a lot of bitching about it on line and the predictable taunt from conservatives was "It's all your fault, take responsibility", well I beg to differ on that one. I had no bad debt, business was good and then ---- nothing. It was like a bomb went off in my life and those smug bastards on Wall Street got bailed out while honest business people had to just eat it. I realize now that the rest of the nation was dangerously addicted to easy credit but that does nothing to make me feel any better.

 

[TemplarKormac]

To call this a "miracle" is naive. These banks were "too big to fail" and thus, our government bailed them out with our tax dollars. The banks were never severely punished for their recklessness in the roles they played in damaging the economy. They were told "here, take this money and make sure this never happens again." That's all the Trouble Asset Relief Program really was. All it did was shield the banks from the consequences of their actions, while they continued with the same type of risky lending that started this mess in the first place.

It's like giving a kid a cookie every time he disobeys the rules. He learns nothing, and is encouraged to partake in that misbehavior again. All this has done is throw good money after bad.

 

[NightFox]

.
It was do or die, folks, I'm not kidding.

..and what happens the next time? the root causes have not been addressed (in fact they've just been exacerbated; heaping helpin' of moral hazard anyone? ), all that happened was the problem was papered over with other peoples money (value stolen from current and future generations via money supply expansion and debt).

The next time the happy gang of Wall Street & Washington collude to blow up the financial system, what's the plan? How much can we rob from the future to pay for the sins of the past?

"Those who fail to learn the lessons of history are doomed to repeat them." -- George Santayana

 

[HelenaHandbag]

I pretty much lost everything in 2008-2009, banks and bankers make me furious and probably always will. The fact that the government had to bail them out while I was pretty much on my own and shit out of luck will color my politics for the rest of my life.

But the government didn't have to bail them out.

You lost it all while the big banksters were made whole. And your Dear Leader was all in on that.

But fret not, he extended your paltry unemployment handouts and you can probably go get an EBT card.

 

[NightFox]

I did everything right and still lost. At the time I did a lot of bitching about it on line and the predictable taunt from conservatives was "It's all your fault, take responsibility", well I beg to differ on that one. I had no bad debt, business was good and then ---- nothing. It was like a bomb went off in my life and those smug bastards on Wall Street got bailed out while honest business people had to just eat it. I realize now that the rest of the nation was dangerously addicted to easy credit but that does nothing to make me feel any better.

You can take comfort in the fact that those who made all the bad decisions that led to the crash (Fuld, Blankfein, Dimon, Paulson, Schwarz, et al.. ) had their personal fortunes wiped out in the collapse and have been held personally accountable to the point where their careers and reputations are ruined .. ..OH WAIT.. that's in the OTHER UNIVERSE WHERE JUSTICE ACTUALLY PREVAILS, never mind...

 

[FA_Q2]

Obama saved this country but he needs to do a lot more to get us back to the innovator we were in the 1950, 1960s and 1970s...There's a lot of cave men but I can only hope we can do it.

You do release that this was Bush, not Obama….

 

[occupied]

.
It was do or die, folks, I'm not kidding.

..and what happens the next time? the root causes have not been addressed (in fact they've just been exacerbated; heaping helpin' of moral hazard anyone? ), all that happened was the problem was papered over with other peoples money (value stolen from current and future generations via money supply expansion and debt).

The next time the happy gang of Wall Street & Washington collude to blow up the financial system, what's the plan? How much can we rob from the future to pay for the sins of the past?

"Those who fail to learn the lessons of history are doomed to repeat them." -- George Santayana

The answer of course is everything. When it happens again the big bankers had better just pile on their jets and go hide somewhere.

 

[FA_Q2]

.
It was do or die, folks, I'm not kidding.

..and what happens the next time? the root causes have not been addressed (in fact they've just been exacerbated; heaping helpin' of moral hazard anyone? ), all that happened was the problem was papered over with other peoples money (value stolen from current and future generations via money supply expansion and debt).

The next time the happy gang of Wall Street & Washington collude to blow up the financial system, what's the plan? How much can we rob from the future to pay for the sins of the past?

"Those who fail to learn the lessons of history are doomed to repeat them." -- George Santayana

This.

I disagree that what we did was the correct course of action Mac and not nessisarily because we needed to do something but because we essentially made sure that those that created the entire mess made out like bandits.

It is essentially telling the big banks (who only got bigger) that if they managed to get themselves in trouble they could always count on the government to back them up. Of course, if you were a smaller institution then you were simply fucked.

How can that be considered a good thing is completely beyond me.

 

[Mac1958]

Obama saved this country but he needs to do a lot more to get us back to the innovator we were in the 1950, 1960s and 1970s...There's a lot of cave men but I can only hope we can do it.

I pretty much lost everything in 2008-2009, banks and bankers make me furious and probably always will. The fact that the government had to bail them out while I was pretty much on my own and shit out of luck will color my politics for the rest of my life.

The Meltdown was about far more than the banks. They were the biggest visible villain (and they were definitely a villain), but what happened was the predictable result of too much torque in the system, building and building over a long period of time.

The Meltdown was decades in the making, and it was cultural as much as economic.

.

I did everything right and still lost. At the time I did a lot of bitching about it on line and the predictable taunt from conservatives was "It's all your fault, take responsibility", well I beg to differ on that one. I had no bad debt, business was good and then ---- nothing. It was like a bomb went off in my life and those smug bastards on Wall Street got bailed out while honest business people had to just eat it. I realize now that the rest of the nation was dangerously addicted to easy credit but that does nothing to make me feel any better.

This was far beyond any one person's control, and there was a ton of people who were flat-out fucked as a result, through no fault of their own. And I sure as hell can't blame people for wanting to find one person or one group to blame -- but if there were ever a "team effort", this was it. From consumers who over-loaded on credit as part of our very culture to consumers who knew damn well they couldn't afford homes to politicians who made various mistakes to regulators who had their heads firmly up their asses to banks and mortgage people who fucked people over to ratings agencies who straight up failed, and more.

I sure as hell don't blame you for your anger.

.
It was do or die, folks, I'm not kidding.

..and what happens the next time? the root causes have not been addressed (in fact they've just been exacerbated; heaping helpin' of moral hazard anyone? ), all that happened was the problem was papered over with other peoples money (value stolen from current and future generations via money supply expansion and debt).

The next time the happy gang of Wall Street & Washington collude to blow up the financial system, what's the plan? How much can we rob from the future to pay for the sins of the past?

"Those who fail to learn the lessons of history are doomed to repeat them." -- George Santayana

Yer goddamn right the root causes haven't been addressed. Our culture still values "things" over smart, humble use of money, the banks are still too big to fail (why the fuck Glass-Steagall or something like it isn't back is a sad joke on us), on and on.

What will we do next time? We'll throw a bunch of money at it again. All we seem to know and understand is crisis management.

.

 

[NightFox]

Yer goddamn right the root causes haven't been addressed. Our culture still values "things" over smart, humble use of money, the banks are still too big to fail (why the fuck Glass-Steagall or something like it isn't back is a sad joke on us), on and on.

What will we do next time? We'll throw a bunch of money at it again. All we seem to know and understand is crisis management.

.

The root causes won't be addressed until the full weight of the consequences are felt by all those involved, specifically until those malinvestments are catastrophically unwound and the "too big to fails" are allowed to go under. Yes I know it's an ugly scenario but a generation can either suffer the consequences of their own stupidity or force future generations to suffer them, personally I think foisting off our self inflicted problems on the unborn is patently IMMORAL.

 

[occupied]

.
It was do or die, folks, I'm not kidding.

..and what happens the next time? the root causes have not been addressed (in fact they've just been exacerbated; heaping helpin' of moral hazard anyone? ), all that happened was the problem was papered over with other peoples money (value stolen from current and future generations via money supply expansion and debt).

The next time the happy gang of Wall Street & Washington collude to blow up the financial system, what's the plan? How much can we rob from the future to pay for the sins of the past?

"Those who fail to learn the lessons of history are doomed to repeat them." -- George Santayana

This.

I disagree that what we did was the correct course of action Mac and not nessisarily because we needed to do something but because we essentially made sure that those that created the entire mess made out like bandits.

It is essentially telling the big banks (who only got bigger) that if they managed to get themselves in trouble they could always count on the government to back them up. Of course, if you were a smaller institution then you were simply fucked.

How can that be considered a good thing is completely beyond me.

They used to do terrible things to bankers who betrayed the trust necessary to have a successful banking industry, guess they found a cure for that shit. They just made the banks and the government practically the same thing. It does not seem like a miracle to me, more like some dark necromancy involving lots of sacrificial blood.

 

[Mac1958]

Yer goddamn right the root causes haven't been addressed. Our culture still values "things" over smart, humble use of money, the banks are still too big to fail (why the fuck Glass-Steagall or something like it isn't back is a sad joke on us), on and on.

What will we do next time? We'll throw a bunch of money at it again. All we seem to know and understand is crisis management.

.

The root causes won't we addressed until the full weight of the consequences are felt by all those involved, specifically until those malinvestments are catastrophically unwound and the "too big to fails" are allowed to go under. Yes I know it's an ugly scenario but a generation can either suffer the consequences of their own stupidity or force future generations to suffer them, personally I think foisting off our self inflicted problems on the unborn is patently IMMORAL.

Yup. Here's the problem to me: It has become political. And when ANYTHING becomes political it becomes binary, black & white, either/or, all the "fault" of "those guys, over there". You can't fix a problem this deep with simplistic thought processes.

Nothing gets fixed until we grow up and stop pointing the finger like that.

Not holding my breath, of course.

.