The horizon is not so far as we can see, but as far as we can imagine

Firms Want To Keep Their Subsidies and Their Huge Salaries and Bonuses

american-dollar-toilet-paper1So very, very tiresome:

If populist outcries over bank compensation continue, no company will touch “any other government program with a ten-foot pole,” Stephen Stanley, chief economist at RBS Greenwich Capital Markets, wrote in a March 19 note.

This is what happens when firms are too big to fail and they know that the government doesn’t have the guts to nationalize them or really look hard at their books and make them go into bankruptcy if they’re, well, bankrupt.

No bank which doesn’t need the money should have the money.  But because there has been an unwillingness to really look hard at bank books and to evaluate them, we don’t actually know if they need it.  The “stress” tests which are underway don’t count since they don’t include hard looks at the loans and securities real values, and use an overly optimistic economic scenario.

But assuming that real financial audits had been done, you’d know whether banks need money.  If they did, you give them two options:

1) Take it.

2) We’ll put you in receivership or nationalize it.

It shouldn’t be a goal to force money on banks that don’t need it.  Either they need it, or they don’t.  If they don’t, by all means, let them go about their business.

As for getting lending again, the simplest solution is still nationalization and using the banks nationalized to lend, since once the government controls them it controls whether they lend.  The second easiest is to have the Fed just lend directly to consumers and businesses, rather than trying to do it through unwilling banks.

Instead we have this silliness where the banks, who have had trillions of losses, say they don’t need help but will take it for the good of the country.

Of course, it’s getting more and more true.  Once the Treasury, Fed and FDIC take all their bad bets off their hands at prices which are more than they could get in the real free market, then they’ll be able to go back to paying themselves ridiculous bonuses for being incompetent fools who blew up the entire world’s financial system.  Until that happens, they’ll whine, but do enough of what they’re told to not upset the gravy train.

And that’s because neither Bush nor Obama had the guts to toss the vast majority of them out on their ears.  Because of that we will have another crisis, guaranteed.

In poker they say “bet the people, not the cards” and I’m willing to bet these incompetent greedy fools have another disaster in them.  It may take another 4 to 8 years, but having gotten away with this one, they’ll do it again.

Bet on it.


The Market is Not The Economy


What to Watch For In Obama’s Financial Sector Reforms

1 Comment

  1. jo6pac

    I think you pretty much nailed it. O will just keep going on the course that they have layed out with no real reform. I don’t think they do anything to help us the little people. I wonder if they will be able to sidestep the world currency deal coming their way. Will the world move back to gold and away from the dollar that just keeps on giving.

Powered by WordPress & Theme by Anders Norén