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Wed May 23, 2012, 02:42 AM

 

A question for Obama and\or his supporters here:

Why did banks (meaning share- and bondholders) get bailed out but not other segments of and participants in this economy?

I ask this seriously. There must be a reason why a subsection of our society got a bailout that no one else received. Was it to keep the economy functioning? Was there a general fear that without the too-big-to-fail banks, the whole capitalist edifice might totter and collapse?

I ask this question not to snark at Obama or his supporters but out of genuine curiosity. Why did a subset of society get special treatment that the rest of us did not? Seems really unfair and unjust, but there may be reasons of state that I'm msising or failing to understand.

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Reply A question for Obama and\or his supporters here: (Original post)
coalition_unwilling May 2012 OP
DCBob May 2012 #1
coalition_unwilling May 2012 #3
DCBob May 2012 #7
white_wolf May 2012 #116
tabasco May 2012 #181
randome May 2012 #17
Freddie Stubbs May 2012 #47
coalition_unwilling May 2012 #65
H2O Man May 2012 #89
sad sally May 2012 #130
Marr May 2012 #106
dkf May 2012 #2
coalition_unwilling May 2012 #5
quaker bill May 2012 #15
coalition_unwilling May 2012 #68
Red Knight May 2012 #144
quaker bill May 2012 #145
coalition_unwilling May 2012 #146
quaker bill May 2012 #172
coalition_unwilling May 2012 #178
vaberella May 2012 #4
coalition_unwilling May 2012 #6
louis c May 2012 #22
Spider Jerusalem May 2012 #48
coalition_unwilling May 2012 #64
Spider Jerusalem May 2012 #85
coalition_unwilling May 2012 #88
Bandit May 2012 #135
Marrah_G May 2012 #34
coalition_unwilling May 2012 #70
Marrah_G May 2012 #71
coalition_unwilling May 2012 #73
freshwest May 2012 #8
grantcart May 2012 #9
Horse with no Name May 2012 #10
great white snark May 2012 #11
Horse with no Name May 2012 #12
truth2power May 2012 #175
cherokeeprogressive May 2012 #24
Skidmore May 2012 #14
Marr May 2012 #108
Marrah_G May 2012 #37
treestar May 2012 #173
dionysus May 2012 #179
lunatica May 2012 #18
FSogol May 2012 #32
JoePhilly May 2012 #41
goclark May 2012 #56
ieoeja May 2012 #63
joshcryer May 2012 #149
coalition_unwilling May 2012 #155
joshcryer May 2012 #157
coalition_unwilling May 2012 #163
joshcryer May 2012 #165
coalition_unwilling May 2012 #167
joshcryer May 2012 #168
coalition_unwilling May 2012 #72
girl gone mad May 2012 #147
coalition_unwilling May 2012 #150
joshcryer May 2012 #151
coalition_unwilling May 2012 #152
joshcryer May 2012 #156
coalition_unwilling May 2012 #161
joshcryer May 2012 #162
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joshcryer May 2012 #169
girl gone mad May 2012 #158
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coalition_unwilling May 2012 #78
KharmaTrain May 2012 #99
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MrScorpio May 2012 #20
Scuba May 2012 #21
coalition_unwilling May 2012 #79
fredamae May 2012 #23
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Sheepshank May 2012 #113
coalition_unwilling May 2012 #139
boppers May 2012 #25
Romulox May 2012 #28
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B2G May 2012 #26
Romulox May 2012 #29
uponit7771 May 2012 #42
Romulox May 2012 #59
Ikonoklast May 2012 #27
Romulox May 2012 #30
fredamae May 2012 #46
LynneSin May 2012 #51
fredamae May 2012 #54
fredamae May 2012 #57
Sheepshank May 2012 #91
Romulox May 2012 #58
fredamae May 2012 #66
Ikonoklast May 2012 #122
Romulox May 2012 #31
WI_DEM May 2012 #36
Marrah_G May 2012 #39
FarLeftFist May 2012 #52
TBF May 2012 #61
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TBF May 2012 #82
Marr May 2012 #109
FarLeftFist May 2012 #124
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white_wolf May 2012 #118
FarLeftFist May 2012 #125
white_wolf May 2012 #129
Bodhi BloodWave May 2012 #176
coalition_unwilling May 2012 #83
FarLeftFist May 2012 #38
uponit7771 May 2012 #43
MatthewStLouis May 2012 #49
LynneSin May 2012 #50
Post removed May 2012 #53
JNelson6563 May 2012 #55
nofurylike May 2012 #141
TBF May 2012 #60
coalition_unwilling May 2012 #84
treestar May 2012 #67
coalition_unwilling May 2012 #86
Spider Jerusalem May 2012 #110
coalition_unwilling May 2012 #182
treestar May 2012 #180
raouldukelives May 2012 #77
Sheepshank May 2012 #81
coalition_unwilling May 2012 #92
Sheepshank May 2012 #107
stevenleser May 2012 #87
coalition_unwilling May 2012 #93
stevenleser May 2012 #95
coalition_unwilling May 2012 #96
stevenleser May 2012 #102
Romulox May 2012 #115
stevenleser May 2012 #117
Romulox May 2012 #119
stevenleser May 2012 #123
coalition_unwilling May 2012 #140
Romulox May 2012 #97
stevenleser May 2012 #98
Romulox May 2012 #101
stevenleser May 2012 #103
Romulox May 2012 #112
FarLeftFist May 2012 #104
Romulox May 2012 #111
FarLeftFist May 2012 #126
H2O Man May 2012 #94
rustydog May 2012 #100
jwirr May 2012 #114
Yo_Mama_Been_Loggin May 2012 #120
coalition_unwilling May 2012 #128
just1voice May 2012 #121
jpak May 2012 #127
coalition_unwilling May 2012 #132
jpak May 2012 #170
coalition_unwilling May 2012 #171
GarroHorus May 2012 #131
cstanleytech May 2012 #134
coalition_unwilling May 2012 #138
cstanleytech May 2012 #142
joshcryer May 2012 #148
kentuck May 2012 #174
coalition_unwilling May 2012 #177

Response to coalition_unwilling (Original post)

Wed May 23, 2012, 02:54 AM

1. yes.

to both questions in para 2.

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Response to DCBob (Reply #1)

Wed May 23, 2012, 03:01 AM

3. So, maybe the obvious next question is, is it appropriate

 

that government pick and choose who gets bailed out and who does not?

Feeling really bad for people whose homes have been foreclosed and wondering why our society could not bail them out if it was going to bail out private banks.

The fact that I am raising this question may itself suggest why progressives are so dis-enamored of Obama this time around. A bunch of rich stock- and bondholders got a bailout when people who really needed help were left twisting in the wind.

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Response to coalition_unwilling (Reply #3)

Wed May 23, 2012, 03:08 AM

7. yes, given..

"the whole capitalist edifice might totter and collapse"

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Response to DCBob (Reply #7)

Wed May 23, 2012, 01:07 PM

116. We would probably be better off if this wretched system collapsed.

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Response to white_wolf (Reply #116)

Sun May 27, 2012, 11:57 AM

181. Any evidence to support that assertion?

 

Historical examples?

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Response to coalition_unwilling (Reply #3)

Wed May 23, 2012, 05:47 AM

17. What's the alternative?

 

Don't pick and choose? Give money to everyone?

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Response to coalition_unwilling (Reply #3)

Wed May 23, 2012, 08:40 AM

47. You act this this is something new

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Response to Freddie Stubbs (Reply #47)

Wed May 23, 2012, 09:54 AM

65. Hunh? Possibly garbled syntax in your response. But I'm in the process

 

of reading Joseph Stiglitz' Freefall, the substance of which informs and predicates my question.

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Response to coalition_unwilling (Reply #65)

Wed May 23, 2012, 10:50 AM

89. You asked a

valid question. Its validity does not corelate on if it is "new," or has been asked before. Were that the case, one should not question the military adventures in Afghanistan, because there were questions about Vietnam; question military strikes in Pakistan, because of previous experiences in Cambodia; or question Cheney's role in the Plame scandal, because we already asked about Watergate.

When valid questions are responded to with dim, concrete thinking, there are but two possibilities: (1) the responder lacks insight; or (2) you've touched a nerve. One could argue that the "nothing new here" response combines the two.

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Response to H2O Man (Reply #89)

Wed May 23, 2012, 04:46 PM

130. Double amen, Mr. H2O Man

To each his sufferings: all are men,
Condemn'd alike to groan—
The tender for another's pain,
Th' unfeeling for his own.
Yet, ah! why should they know their fate,
Since sorrow never comes too late,
And happiness too swiftly flies?
Thought would destroy their Paradise.
No more;—where ignorance is bliss,
'Tis folly to be wise.

From Thomas Gray's poem, Ode on a Distant Prospect of Eton College (1742)

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Response to coalition_unwilling (Reply #3)

Wed May 23, 2012, 11:53 AM

106. Another natural follow-up question is,

 

"Why is an institution that is 'too big to fail' in private hands?".

If an institution really can crash the national economy all on it's own, then there's no excuse for not seizing it, or at the very least regulating it so tightly that it is essentially a government operation. No private group should have the power to destroy the nation's economy.

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Response to coalition_unwilling (Original post)

Wed May 23, 2012, 02:54 AM

2. The FDIC doesn't have enough to bail out a big bank.

 

http://finance.fortune.cnn.com/2010/06/23/fdic-funds-woes-deepen/

Call your florist. The federal deposit insurance fund isn’t coming home from the hospital any time soon, thanks to a sickly economy and the unstinting generosity of our leaders in Congress.

The Federal Deposit Insurance Corp. on Tuesday published the latest bleak prognosis for the fund it runs on behalf of bank depositors. The FDIC added a quarter to its estimate of the time it will take the fund to recover, marking the third time in two years that its so-called restoration plan has gotten stretched.

The FDIC said the fund, which is under water by about $21 billion amid a surge of bank failures, won’t reach its statutory minimum funding level (1.15% of insured deposits) for at least seven years. Even if the economy somehow muddles through the Gulf oil disaster, the still-gathering euro crisis and who knows what else, the FDIC’s estimate puts a full deposit fund recovery off till the first quarter of 2017, all else equal.

But this being regulatory reform season, all else is most definitely not equal. Congress, beseeched by small banks and small businesses alike, is preparing a grabbag of giveaways that will push the FDIC fund’s recovery out an additional two quarters — unless the FDIC again raises the fees paid by insured banks, a step it prefers to avoid with unemployment near 10%.

The biggest gift is a plan to permanently raise the federal deposit insurance limit to $250,000 from $100,000. Congress temporarily imposed the higher limit in 2008 to keep funds from deserting the banking system, in a change scheduled to expire in 2014.


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Response to dkf (Reply #2)

Wed May 23, 2012, 03:04 AM

5. Not sure what the FDIC has to do with the question I raised, since the FDIC

 

insures depositors against bank failure.

What I'm referring to is the fact that banks were insolvent due to toxic mortgages and derivatives they held whose values had precipitously declined. Instead of being allowed to fail and their assets liquidated (as would typically occur with any other kind of bankruptcy), these banks were given access to funds through the Federal Reserve essentially at 0% interest and allowed to value their toxic assets at far above their market value.

The end result is that banks and their stock- and bondholders received special dispensation that the rest of society did not.

This is a completely separate issue and question than the adequacy (or lack thereof) of funding for the FDIC.

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Response to coalition_unwilling (Reply #5)

Wed May 23, 2012, 05:33 AM

15. Not so much

If you had any funds in one of these banks, they were to some significant extent tied up in toxic assets, and had in fact already been lost. Allowing the bank to truly fail means that your savings and checking account is now really worth pennies on the dollar.

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Response to quaker bill (Reply #15)

Wed May 23, 2012, 09:55 AM

68. Not if the account is FDIC-insured and less than $250,000. Or

 

am I failing to understand something here?

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Response to coalition_unwilling (Reply #68)

Thu May 24, 2012, 08:16 AM

144. The FDIC=bank bailouts with your money

Because the problem is that we have this thing created which is the combo investment/commercial bank. This allows JPMorgan to gamble away money----deposited money---and know that a chunk of that change is automatically insured. This is why Glass-Steagel was so important--it didn't allow for this sort of mixture. An investment bank was just that and its gambling money was not insured.

So yeah--it kinda has a lot to do with things.

The marriage of government and banks that exists today is deeper than most people know.

The total cost of the subprime losses are around 1.4 trillion dollars. So if they had just fixed that--that's all it would have cost. But the problem was leverage and CDOs and these exotic investment securities that the banks built. That bailout cost more like 13 trillion. They could have paid off everyone's mortgage in the country and bought a home for those who didn't and it would have been a trillion dollars less.

This wasn't about saving the economy. That could have been done bottom up instead of top down(har-har). It was about protecting friends of Hank Paulson.

Obama and all the other politicians work for Wall Street first. Main Street is an afterthought.

That's just the way it is. Until money in politics is cleaned up it will always be this way

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Response to coalition_unwilling (Reply #68)

Fri May 25, 2012, 09:43 PM

145. Money is money

The FDIC did not have anywhere near enough. Bottom line the bankers were never going to really lose all this money, because they were gambling with yours. If the bets go sour, there is no money in the bank to cover your account balance, and FDIC goes to the taxpayer (more accurately the Treasury) for funds. Since the Treasury did not have the many Trillions needed, Treasury then goes to the FED, the FED fires up its workstations and mouse clicks vast quantities of money into existence, pretty much just as it did.

In the final analysis, these folks "borrowed" your money to buy vaporware certificates, worth in truth far, far less than the paper they were printed on.

I have actually been down this road. My dear beknighted grandmother purchased with her life savings and I subsequently inherited an unsecured investment in a Savings and Loan. I ended up with a certificate worth many shares in a bankrupt S&L. A decade after her death, the S&L came out of bankruptcy, and suddenly the shares that were absolutely worth nothing and could not be sold for 15 years became worth $0.25 on her original dollar. I sold them at the first opportunity.

The taxpayers were going to be dinged, either in a complete wipe out of their savings, or with the expense of a bail out.

FDIC is not set up to handle a systemic collapse of this size, they did not have the money, and were never set up for this. They are set up much like the fire insurance on your house, it only works because a relatively small number of homes see damage in any year. It would fail if most of them burnt up at the same time. This is something I am also familiar with, I live in FL and we had 4 hurricanes back to back over a three week period in 2004. Nearly everyone had claims and the insurance industry barely made it through.

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Response to quaker bill (Reply #145)

Fri May 25, 2012, 10:04 PM

146. If the FDIC did not have enough funds to rescue the banks under its charter, then

 

Last edited Fri May 25, 2012, 10:43 PM - Edit history (1)

there are a couple immediate remedies that come to mind:

1) raise the insurance premiums all banks pay to the FDIC
2) increase appropriations to fully fund the FDIC

BTW, the FED does not create money with "mouse clicks." It creates money by buying Treasuries on the open market. When the Fed purchases a Treasury, the bank selling it surrenders said Treasury and, in return, receives a $ credit on its balance sheet. Those $ credits are money created out of thin air by the Fed, if you will, but there is a Treasury (an asset) offered in exchange.

In a larger sense, money is created when banks loan money to businesses and consumers. I'll be happy to explain how that works if it's not clear.

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Response to coalition_unwilling (Reply #146)

Sun May 27, 2012, 06:19 AM

172. Nice concepts, but not actually true

The TARP program literally bought "troubled assets" with with dollars that were mouse clicked into existence by precisely 4 people sitting at work stations in cubes at the NY Fed. They did not borrow it from anyone. This is really true and has been well documented. Well more than a trillion dollars were created this way, I recall the number approaching 4 trillion.

If home fire insurance had to have funds to cover a moment where all homes burned up at the same time, no one could afford to buy it. The same goes for the FDIC. The price of fire insurance is set by actuaries who determine how much loss is likely in any year and a reasonable worse case scenario. Even their worse case scenario leaves the overwhelming vast majority of homes untouched in any year. This is reasonable because have never seen an event that burns all homes up at the same time.

We have seen an even where nearly all banks failed at the same time (the great depression). However, FDIC premium rates and reserves are set to cover the occasional bank failure, and then only in the situation when the bulk of the bank's assets still have value. In these cases value the failed bank assets is not enough to cover liabilities but it is enough to cover most, so only some funds are needed to fill this gap. In 2008 the failed institutions in some cases had a net asset value of less than zero. This is why the "troubled assets" were purchased with funny money at face value, not market value, because there was no market value.

Your understanding is fair, because most of the time, things work as you described. This was not one of those occasions. The "things of value" surrendered had no value. The money to purchase them was not borrowed, because no one was lending. It was clicked into existence from nothing to purchase at high price things of no real value. Some of that funny money is now in your savings account.

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Response to quaker bill (Reply #172)

Sun May 27, 2012, 10:35 AM

178. Actually, Congress appropriated funds for TARP, somthing in the

 

neighborhood of $700 billion, IIRC, for the first round. Those funds were part of a much larger federal budget deficit for 2008-09, a deficit funded by the Treasury Department and FED selling bonds to investors. Ironically, when the government sells bonds, the action of so doing actually 'destroys' money, i.e., reduces the monetary supply, by removing said funds from the monetary supply in return for bonds which it exchanges.

Not sure where your '4 trillion' figure comes from. I have seen the figure of '3.6 trillion' mentioned somewhere, but don't recall where.

Ah, yes, the 'things of value' had no value. That's is why the program was referred to variously as 'cash for trash' or other such unflattering labels. It helps to distinguish, though, between 'nominal' and 'real' here. The 'trash' the banks exchanged had nominal, i.e., face, values. Those tranches of CDOs had a face value which was used as its collateral value during the bailout (a subject of much controversy, IIRC), but the tranches had much less 'real value' (which is normally what collateral bases itself upon).

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Response to coalition_unwilling (Original post)

Wed May 23, 2012, 03:02 AM

4. What irritates me about your question is that it's highly divisive.

This is a Democratic website. President Obama is the current President and one running for President for 2012. That by and large would mean this site is not supposed to be divided into groups of Obama supporters and anti-Obama supporters. <---This is particularly disgusting. So only Obama supporters would create a rationale to answer your question? You know there are plenty of non-Obama supporters who also pushed for bank bail out or too big to fail. Or do you think we (Obama supporters) would jump through hoops to answer your question? Just so you can run around marginalizing our responses so that you can suggest, imply or blatantly say we stretch things to fit our own rhetoric. Because we get that a lot.

From my understanding of the two big to fail it was a necessity. As a New Yorker in the metropolitan area. Chase goes down and New York falls into the sea like Atlantis. During the 70s Kotch sold out New Yorker basically to the big banks. One of whom was Chase since it is now tied to JP Morgan (which really owned us). When people in the New York get unemployment they have to cash their checks at a Chase bank. This bank has found it's way into every aspect of New York life. When I saw certain City government departments are using Chase for one thing or another...I was worried. And if that bank fails a huge portion of New York dies with it. New York goes down and most of the mid west loses some of their supplemental income that comes from New York. Don't get me wrong, my way of looking at it is rudimentary and hardly that of a trained economist on the matter. My interest in Economics was developmental econ and not finance.

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Response to vaberella (Reply #4)

Wed May 23, 2012, 03:08 AM

6. Wow, I must have touched a nerve without really intending to. I meant that

 

I was pretty sure there was a legitimate argument for bailing out the too-big-to-fail banks but that I was unsure what that argument was.

I will be voting for Obama in November because Romney would be an unmitigated disaster for the globe. That said, I think my question is one that many progressives have - why do certain segments of society (like rich bank shareholders) get preferential treatment when people who really need help are left to twist in the wind?

I also have to say that, even should JP Morgan Chase become insolvent, Manhattan Island, its inhabitants and its marvelous architecture and cultural landmarks will remain. And surely there are other banks who could fill the JP Morgan Chase void. It is disgusting that JPM-Chase has its tentacles in so many sectors of New Yorkers' lives - wonder what brainiacs in your city and state governments allowed that to happen. (Out here in California, Bank of America administers all the EBT cards for unemployment and also I think welfare, but not sure about the latter.)

If you think I am violating DU's TOS by asking the question, please alert a jury on it so it can be adjudicated.

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Response to coalition_unwilling (Reply #6)

Wed May 23, 2012, 06:27 AM

22. Simple Choice

 

I'm a labor Democrat

I have to choose between an political party that disappoints me and one that wants to destroy me.

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Response to coalition_unwilling (Reply #6)

Wed May 23, 2012, 08:41 AM

48. Your position is basically ignorant, I'm afraid

 

it's not about "bailing out rich shareholders". It's about millions of individual depositors exposed to significant risk by possible bank failures (the FDIC can't underwrite the losses, it would be economically catastrophic), and the knock-on effects of potentially millions or tens of millions of people being financially wiped out--do you honestly think the financial and economic crisis of the past four years would have been BETTER had the banks been allowed to fail? Because that's frankly stupid. And you seem to be forgetting who happens to've been president at the time that the so-called "Troubled Asset Relief Program" passed Congress; that would be Bush, not Obama.

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Response to Spider Jerusalem (Reply #48)

Wed May 23, 2012, 09:51 AM

64. Don't intend to get into a name-calling tit-for-tat here, but

 

I don't think the question ever really was whether individual mom-and-pop depositors would or could be made whole by the FDIC. They could have and would have been made whole. (Admittedly, there are some problems with the FDIC's own reserves but those presumably could be easily shored up by the Federal Reserve's largesse or by Congress acting to increase the FDIC's reserves.)

I think the 'real problem,' as I understand it, is that these banks were technically insolvent. That is, the banks' liabilities in the form of money owed to depostiors far exceeded their assets, the toxic mortgages and derivatives they held on their books. Usually, in capitalism, when firms are insolvent (or 'bankrupt'), shareholders are wiped out and bondholders become the new shareholders through bankruptcy proceedings. But the government bailouts here allowed shareholders to not have to face the consequences of their poor investments. In essence, while rewards remained privatized, risks were 'socialized'.

I fully understand that the process began under Bush and Paulson. The alphabet soup of bailouts and subsidies reached such a crescendo that it's sometimes hard to keep straight exactly what the bank bailouts even mean any more. That said, I'm almost 100% certain that the bailout policies and practices continued and were extended under Obama, Geithner and Bernanke.

If I might restate my question, is it appropriate for rewards to be 'privatized,' but risks to be 'socialiized' for one segment of the economy while for others (like homeowners with underwater mortgages), both risks and rewards remain privatized?

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Response to coalition_unwilling (Reply #64)

Wed May 23, 2012, 10:41 AM

85. That's basically assuming something that wasn't, in the event, tested.

 

And the socialisation of risk reflects the relative importance to the overall economy; it's appropriate given that the consequences of mass bank failures would have been catastrophic for the entire economy (due to the loss of capital and the fallout of investors and depositors losing everything or only getting pennies on the dollar); this is what happened in 1929-1933, this is why we have the FDIC and fractional reserve rules now. Foreclosure is something that affects individuals, perhaps many individuals, but still compared to the economic consequences of mass bank failures and the long-term damage to the economy that would cause? there is no comparison, and there's no valid argument for collectivising individual risk in taking out a mortgage vs the collective risk of putting your money in a bank along with millions of other depositors. I'm sorry you can't wrap your head around this.

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Response to Spider Jerusalem (Reply #85)

Wed May 23, 2012, 10:48 AM

88. Actually, I can wrap my head around your position (I think). You're

 

arguing that banks' centrality to the system is of such a high degree of importance that they simply cannot be allowed to fail. Fair enough. (By extension, you seem to be implying that while individual homeowners' being foreclosed upon is tragic, such individual harm does not threaten the system. I apologize if I am unfairly characterizing your remarks. Struggling with the language to understand the mess myself.)

Please allow me to restate the question once again: why were these banks that failed allowed to remain under private ownership and management and not nationalized and their assets placed under government control and government management?

It seems like the very folks who got us into the mess (the so-called evil 'banksters') are the ones who got rewarded for their perfidy.

Am I mis-understanding something?

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Response to coalition_unwilling (Reply #6)

Wed May 23, 2012, 05:52 PM

135. The big "bailout" was done under the Bush* Administration

Obama bailed out the auto industry and was rewarded "Big Time" for it.

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Response to vaberella (Reply #4)

Wed May 23, 2012, 08:22 AM

34. We need to be able to discuss problem even in an election year

Politics is not a sporting event. It's not about just making sure your team "wins". Personally I will always call out the Dems when they do shitty things, if we stay silent nothing changes.

I really liked your second paragraph and wish you had just posted that.

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Response to Marrah_G (Reply #34)

Wed May 23, 2012, 10:00 AM

70. Thank you for the compliment. After I posted the thread in the

 

wee small hours of the morning, my wife told me that some people might construe it as 'baiting Obama supporters' and get angry because of it. That really was not my intent but I almost pulled the thread down so as not to cause offense.

The origin of my question is far more innocent - am in the process of reading Jospeh Stiglitz' Freefall (which I highly recommend to interested laypeople) and his discussion informs the question of why certain segments of the economy (like banks) get their risks socialized (in the form of government bailouts), while other segments (like underwater homeowners) have to face the fury of the market without any assistance.

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Response to coalition_unwilling (Reply #70)

Wed May 23, 2012, 10:02 AM

71. "talking" online is never easy

We don't have tone or facial expressions and that often leads to conflict.

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Response to Marrah_G (Reply #71)

Wed May 23, 2012, 10:08 AM

73. Thank God for the 'sarcasm' emoticon :) - n/t

 

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Response to coalition_unwilling (Original post)

Wed May 23, 2012, 03:17 AM

8. I'll bookmark this and get back to you as I was writing a book to answer here, LOL.

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Response to coalition_unwilling (Original post)

Wed May 23, 2012, 03:37 AM

9. "A question for Obama supporters here"

So you don't identify yourself as an Obama supporter?

Your question includes a lot of assumptions that aren't true (shareholders were not 'bailed out') but to the greater question that I think that you are asking which is "why did the government make sure that the financial institutions were not allowed to collapse" the answer is that they were collapsing. If you have ever seen movies of a banking collapse of the 1930s they weren't afraid of that happening they were witnessing that happening.

If you ever saw "Its a Wonderful Life" then you saw the careful explanation that the financial institutions don't have liquid assets but have loaned assets out. If everyone were to call for all of their deposits back at the same time then all of the banks would collapse.

They weren't afraid of this happening, they were watching it happening.

The largest retail banking operation in the world was Washington Mutual. It had assets of over $ 300 billion. Of that only $ 11 billion were 'non performing'. Nevertheless a run on the bank slowly built up steam and about 6 billion in deposits were taken over a two month period. They received a credit downgrade and the greatest bank run in American history was in full throated abandon. In just 9 days another B 16 billion in deposits were taken out. If dramatic steps were not taken then all of the banking institutions would have been at risk and another complete collapse completed.

You mentioned that it "seems really unfair". Seems unfair? It is completely unfair. Lehman was allowed to go down while AIG was not.
There is nothing fair about it. it wasn't an exercise in fairness it was an exercise in jolting the system with enough voltage (distributed completely unfairly) to arrest the panic and instill confidence.

The rationale for this is simple; we learned from the Great Depression that if you allow a faltering banking system to completely fall through a black whole that tens of millions will be cast into years of unemployment, hunger and misery.

The idea that it was easy or that there was another viable option doesn't square with the facts, and in many cases, like Bear Sterns, for example, while the institution continued the shareholders were not bailed out but got pennies on the dollar and ($ 10 a share off of its previous $ 133 per share price).

The action was dramatic, effective and unjust. It saved tens and tens of millions from poverty.

Now if you want to ask about particular actions of the bailout you might want to pick from the list. Some were more just than others. The ones that were conducted under the Obama administration were significantly more fair and more effective than the previous administration.

You can find a list of all of the different actions here:

http://money.cnn.com/news/storysupplement/economy/bailouttracker/index.html

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Response to grantcart (Reply #9)

Wed May 23, 2012, 05:07 AM

10. To be fair

There are people who will VOTE for Obama...simply because the other choice is horrific....and those that SUPPORT every.single.thing.he.does--regardless of how toxic or how divisive or antithetical of progressive values it is.

I believe the OP was speaking to the latter--not the former.

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Response to Horse with no Name (Reply #10)

Wed May 23, 2012, 05:11 AM

11. To be even fairer.

"those that SUPPORT every.single.thing.he.does"

There are no such members here.

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Response to great white snark (Reply #11)

Wed May 23, 2012, 05:13 AM

12. Oh yes

there are. Stick around awhile...you'll see them.

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Response to Horse with no Name (Reply #12)

Sun May 27, 2012, 08:19 AM

175. You are correct, horse. eom

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Response to great white snark (Reply #11)

Wed May 23, 2012, 07:05 AM

24. lol

 

K

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Response to Horse with no Name (Reply #10)

Wed May 23, 2012, 05:27 AM

14. The problem I have with castigating people in the latter category

is the continual ignoring of the role of the other branches of government in shaping policy and laws. I find myself defending the President quite often because I understand that there is a Congress on the Hill that literally had done nothing to participate in governance. You can't ignore the amount of obstruction coming from that group any more than you can ignore the radicalized Supreme Court's role either.

Yes, I support the President because I believe that fundamentally he has the nation's welfare at heart and consistently works toward a solution for all people. I appreciate the fact that he sees himself as elected to an office responsible to all citizens, not just as select few, as did Bush and as will Romney if he wins. Like it or not, we do need to arrive at some sort of common ground with those who would disagree with our most cherished ideas. There is a difference between what we would like to exist and what is realistically feasible in real time.

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Response to Skidmore (Reply #14)

Wed May 23, 2012, 12:08 PM

108. The problem I have with that line

 

is that people making it seem to think no one else ever took a civics class.

Most of us do have an understanding of the basic functioning of our government and how policy is made-- in theory. It ends up being much more complex than a simple 'checks and balances' process, as politicians regularly use the process to provide political cover for themselves.

For instance, the whole process by which Single Payer was excluded from the healthcare debate, and then the 'public option' as well. The Democratic establishment organized committees in such a way as to exclude Single Payer from the get-go. When the so-called 'public option' was later dropped, the blame was laid at the feet of the Republicans, with Democratic politicians explaining they needed Republican support. When they later passed it without Republican support, the 'compromises' remained firmly in place.

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Response to Horse with no Name (Reply #10)

Wed May 23, 2012, 08:27 AM

37. He will get my vote

But I would not call myself a supporter. He is to far right for my political views.

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Response to Horse with no Name (Reply #10)

Sun May 27, 2012, 07:46 AM

173. Nonresponsive

So letting the banks fail was OK?

There are those with this irrational hatred of "the banisters" who are apparently blind to what grant cart said above. And who would they be criticizing if they were living in a full blown recession right now?

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Response to Horse with no Name (Reply #10)

Sun May 27, 2012, 11:45 AM

179. what a steaming load of bullshit.

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Response to grantcart (Reply #9)

Wed May 23, 2012, 05:48 AM

18. Thank you

You may not have made a dent in the education of the OP, but you sure helped me to understand a lot more.

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Response to grantcart (Reply #9)

Wed May 23, 2012, 08:12 AM

32. +1 n/t

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Response to grantcart (Reply #9)

Wed May 23, 2012, 08:33 AM

41. +1

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Response to grantcart (Reply #9)

Wed May 23, 2012, 09:15 AM

56. Thanks grantcart

for taking the time to explain, in an elegant way, to a DU poster didn't identify as a "Obama Supporter."


Seems like that Person isn't following some of the rules as we lead up to the election.



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Response to grantcart (Reply #9)

Wed May 23, 2012, 09:44 AM

63. It amazes me how many people on DU are to the Right of Bush on this issue.

 


Letting the banks fail was just so Hooverish. It would have finally put an end to the FDR legacy. Not even most Republican power brokers are THAT far to the Right at this time.


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Response to ieoeja (Reply #63)

Fri May 25, 2012, 10:38 PM

149. Marxist Historical Materialism. Let the world burn.

They wanted the entire country to fall apart, and every time it's from the extreme authoritarian left.

Which isn't too different from the extreme fascist right.

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Response to joshcryer (Reply #149)

Fri May 25, 2012, 10:53 PM

155. Wow, just wow. You're creating a strawman Marx and a strawman

 

Historical Materialism to boot.

You're imputing goals ("wanted the entire country to fall apart" to the Left that sound like they come straight from Fox.

Speaking for myself and myself only, I wanted and want the wealth of the country distributed more equitably so that workers who produce the wealth get a greater share of it.

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Response to coalition_unwilling (Reply #155)

Fri May 25, 2012, 10:57 PM

157. No I'm not. I'm attributing that to the authoriarian left.

And I'm unconvinced it's unfair, simply because I've seen this sort of idea trotted out before.

It's quite simple. There was only one thing that Obama and his administration could make happen in our plutocracy. Bail out the banks, keep the banksters pockets lined. He didn't have the option to redistribute, and nationalizing the banks was just nonsense.

Of course that would've been awesome, that's not the reality the country faced then and it's not the reality the country faces now.

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Response to joshcryer (Reply #157)

Fri May 25, 2012, 11:14 PM

163. Not once did Marx advocate to "let the world burn." Marx was

 

not a Luddite nor an Anarchist.

"Nationalizing the banks was just nonsense"??? Well, we actually did half of that - we socialized\nationalized the risk (through the bailouts) but we allowed the rewards to remain privatized.

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Response to coalition_unwilling (Reply #163)

Fri May 25, 2012, 11:23 PM

165. TARP was roughly $50 billion (losses) all said and told.

TARP has been mostly paid back. Some banksters got their bonuses. Meh.

Dialectical materialism is a strand of Marxism, synthesizing Hegel’s dialectics, which proposes that every economic order grows to a state of maximum efficiency, while simultaneously developing internal contradictions and weaknesses that contribute to its systemic decay.


http://en.wikipedia.org/wiki/Dialectical_materialism

Marx is of course right, but regulated capitalism, democracy, attempts to fix those contradictions (things like Glass-Steagal). Then we elect assholes who reverse the contradictions and the system fails. The only way to get to the Historical Materialist road map is to not fight the contradictions. ie, the only logical view is to let the world burn by doing so, as the system has already become "too big to fail."

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Response to joshcryer (Reply #165)

Fri May 25, 2012, 11:36 PM

167. The IMF estimates that the global banking crisis cost in the neighborhood

 

of $1.6 trillion (figure is from Stiglitz' book, but can't give the citation as I returned book to library today). That's roughly 30 x your $50 billion.

As to whether TARP has been mostly 'paid back,' opinions vary. Banks unloaded their toxic assets (mainly CDOs) at face value and got sound money, i.e., backed by taxpayers, in return. (Hence the sobriquet 'Cash for trash'). I'm not sure those toxic assets have been liquidated yet and, if liquidated, whether at par value or at a loss. Methinks liquidation, when it has occurred, has occurred at a significant loss.

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Response to coalition_unwilling (Reply #167)

Sat May 26, 2012, 01:51 AM

168. Those "toxic assets" were overvalued.

They don't call it a bubble for nothing. All of the "value" the housing bubble "created" was mythical, it was on paper, it was totally asinine. Housing prices have historically been flat, but with the bubble came millions of new homes that simple were overvalued.

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Response to grantcart (Reply #9)

Wed May 23, 2012, 10:06 AM

72. I plan to vote for Obama as the lesser of two evils in November. But

 

I no longer 'support' him the way I did in 2008. Still, as an active member of this board, I'm aware that there are many DUers who remain as enthusiastic or more so and I thought they would be the most adept at providing a rationale for the bailouts.

Your response certainly demonstrates that (and I applaud you for it, by the way).

Just to clarify: are you saying that the FDIC could not have stepped in to take over failing banks and make their depositors whole without the bailouts?

I guess what I'm really asking is why the normal procedure of bankruptcy and liquidation (whereby shareholders are wiped out and bondholders become the new shareholders) was not sufficient in this case, why the risks to investors were socialized while the rewards remained privatized, and why this benefit was extended to the stock- and bondholders of banks but not to individual homeowners with underwater mortgages.

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Response to coalition_unwilling (Reply #72)

Fri May 25, 2012, 10:30 PM

147. You won't get a good answer because you're dealing with people who fundamentally do not understand..

the modern banking system.

Anyone who proclaims that the choice was between bailing out the banks, as was done, and full loss of deposits (the bank run/panic/depression scenario) is just clueless.

As I argued at the time, our best option was pre-privatization with shareholders wiped out, bondholders forced to take haircuts, management ousted, bonuses clawed back. We needed more credit writedowns and mortgage cramdowns. We should have ended the moral hazard and reinstated Glass-Steagall immediately when we had their balls in a sling. We could be in the midst of a genuine recovery right now rather than slogging along. Oh well.

Wait for the Barofsky book. You'll get a peek into why banks were allowed to plunder the national treasure on such a massive scale.

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Response to girl gone mad (Reply #147)

Fri May 25, 2012, 10:38 PM

150. Thanks. I know that these are difficult issues to comprehend for all of us sometimes. I do think

 

that some people's argument that the FDIC was not large enough to handle a 'systemic crash' has some merit, except that there were easy ways to remedy that problem, if indeed it existed, without having to make share- and bondholders whole and keep management complete with obscene bonuses in place.

Grantcart, imo, makes the most convincing case for why the banks had to be bailed out and I applaud his efforts here. I personally think that insolvent banks should have had their assets seized and been nationalized, rather than bailed out and kept in private ownership. This seems to be far to the left of what Stiglitz advocates (conservatorship and bondholders becoming the new shareholders) and is certainly fae, far to the left of what actually did take place.

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Response to coalition_unwilling (Reply #150)

Fri May 25, 2012, 10:43 PM

151. Nationalizing everything is unconstitutional without just compensation.

And it would've caused inflation beyond anything conceivable. Just look at what's happening to Venezuela due to their extreme nationalization.

What a lot of people don't recognize is that the credit unions mostly survived unscathed. Peoples' money should've been in credit unions to begin with.

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Response to joshcryer (Reply #151)

Fri May 25, 2012, 10:47 PM

152. I'm not talking about 'nationalizing everything' (at least in the context of

 

this thread), but about nationalizing insolvent banks by basically wiping out share- and bondholders and placing ownership and contorl of any remaining assets in the hands of the public.

"Just compensation" for whom? By definition, the value of an insolvent bank's liabilities exceed the value of its assets, so shareholders essentially have a worthless investment. Stiglitz suggests that shareholders should have been wiped out and bondholders become the new shareholders, a view that is something of a middle ground between my position and what actually transpired.

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Response to coalition_unwilling (Reply #152)

Fri May 25, 2012, 10:54 PM

156. Do you have a link to Stiglitz's article?

Would not wiping out "shareholders" also have impacted many 401k's?

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Response to joshcryer (Reply #156)

Fri May 25, 2012, 11:02 PM

161. Sorry, it's not an article, it's a great book called "Freefall". I just

 

returned it to the library today, not realizing this thread would continue to get hits. I highly recommend the book for its lucidity and all-around balance. Stiglitz is not big into demonizing folk or name-calling and is fairly dispassionate in his analysis.

I think Girl Gone Mad provides a link to at least one Stiglitz op-ed piece in this sub-thread. That piece may also provide useful entre into Stiglitz' thoughts.

When a bank is insolvent, its shareholders (whether union pension funds, individuals with 401-Ks, or evil 1%ers) are essentially wiped out, in the absence of a bailout. Hence my question in the OP: why do some folks get a bailout while others do not?

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Response to coalition_unwilling (Reply #161)

Fri May 25, 2012, 11:13 PM

162. Thanks, looking at it.

Some folks get a bail out because only some bailouts are politically viable.

401k's have rebounded substantially. An insolvent bank's shareholders are fucked only if the bank actually goes under.

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Response to joshcryer (Reply #162)

Fri May 25, 2012, 11:20 PM

164. I think you have put your hands on a dark truth, that some

 

bailouts are politically viable and others, by extension, are not.

The bank bailouts begun under Bush and continued under Obama were certainly politically contentious. The first bill to create TARP failed narrowly and only after serious arm-twisting\fear mongering\favor granting did the second bill pass.

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Response to coalition_unwilling (Reply #164)

Sat May 26, 2012, 01:54 AM

169. I found the quote:

Banks differ in one respect: the government has a stake because it insures deposits. As we saw in the last chapter, the reason the government insures deposits is to preserve the stability of the financial system, which is important to preserving the stability of the economy. But if a bank gets into trouble, the basic procedure should be the same: shareholders lose everything; bondholders become the new shareholders.7 Often, the value of the bonds is sufficiently great that that is all that needs to be done. For instance, at the time of the bailout, Citibank, the largest American bank, with assets of $2 trillion, had some $350 billion of long-term bonds. Because there are no obligatory payments with equity, if there had been a debt-to-equity conversion, the bank wouldn’t have had to pay the billions and billions of dollars of interest on these bonds. Not having to pay out the billions of dollars of interest puts the bank in much better stead. In such an instance, the role of the government is little different from the oversight role the government plays in the bankruptcy of an ordinary firm.


He further goes on to mention S&L without noting how much money was lost to the FDIC in the S&L crisis.

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Response to joshcryer (Reply #151)

Fri May 25, 2012, 10:59 PM

158. The FDIC nationalizes banks on a regular basis.

http://www.marketplace.org/topics/business/fallout-financial-crisis/bank-takeover-nationalization

I get that the word nationalization is upsetting to people, so call it conservatorship or pre-privatization. The laws are already in place, and as Sheila Bair stated, the FDIC was well prepared.

http://thinkprogress.org/yglesias/2011/09/21/325022/strange-tales-from-confidence-men/

Geithner and Emmanuel stood in the way. A costly mistake, imo.

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Response to girl gone mad (Reply #158)

Fri May 25, 2012, 11:01 PM

160. The losses would've been enormous.

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Response to coalition_unwilling (Reply #150)

Fri May 25, 2012, 10:51 PM

154. Stiglitz supported pre-privatization at the time.

http://www.dw.de/dw/article/0,,4005355,00.html

ETA: I removed the link to the New Yorker piece since I believe it contains inaccurate information.

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Response to grantcart (Reply #9)

Wed May 23, 2012, 10:08 AM

74. Thanks to Grantcart

 

that anone can condence the multitide of activites and actions and scenarios that all occurred simultaneously in the financial industry, in to a legible format is very praiseworthy. Each paragraph could easily have required a novel of full disclosures and findings.

Grantcart...*appreciation*

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Response to grantcart (Reply #9)

Fri May 25, 2012, 10:48 PM

153. The WAMU runs..

were handled quickly by the FDIC.

http://www.bizjournals.com/seattle/stories/2009/09/28/story1.html

You are conflating separate issues here and you've actually only made the OP's point by bringing up WAMU.

The OP is asking why we propped up the TBTFs with TARP, TALF, PPIP, FASB, etc. rather than pre-privatizing these insolvent banks and breaking them up. Essentially, s/he is asking why WAMU was treated to the standard bankruptcy type procedures while Citi, BAC, JP Morgan, etc. were allowed to get even bigger with management richly rewarded in the process.

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Response to girl gone mad (Reply #153)

Fri May 25, 2012, 10:59 PM

159. Well, actually, I was asking why the banking segment of society received preferential

 

treatment (risks socialized but gains kept privatized), while other segments were subject to the full fury of nature red in tooth and claw.

But your question amplifies and builds upon my question.

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Response to girl gone mad (Reply #153)

Fri May 25, 2012, 11:33 PM

166. lol well the shareholders of WAMU don't agree and in court arguing exactly the opposite.


But in anycase you have typically missed the point.

The point is not the speed but the degree.

My point is that WAMU runs were the largest in history, it wasn't some theoretical run but a slow burning run that escalated to a stampede.

So you are wrong on the speed of it but more improtantly wrong because it was an irrelevent point. It is the size not the speed of the runs that was the point.

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Response to coalition_unwilling (Original post)

Wed May 23, 2012, 05:13 AM

13. The bailout was bipartisan. It was begun under Bush and continued under Obama. The

 

answer to your question is that the ruling class wanted the banks bailed out, & didn't much care about the little guys.

It's typical and everybody knows it.

http://www.cbsnews.com/8301-503544_162-20013452-503544.html

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Response to coalition_unwilling (Original post)

Wed May 23, 2012, 05:43 AM

16. You forget, perhaps conveniently, that Obama fought to help the American people too

But has been thwarted at every single turn. Let me repeat that. He has been thwarted at every single turn.

And I personally benefited by his work in pushing mortgage loan modifications enabling people like me to keep our condos. Without that I would have lost my home because I was already embroiled in the foreclosure process. And there are hundreds of thousands, if not a few million people who still have their jobs because he 'bailed out' the auto industry. It's not just the car makers who still have their jobs. It's every company that depends on the car industry to keep their jobs going. Mechanics, car retailers, car repair shops and on and on.

Would you have let the banks collapse? Please tell us how that would have helped the average American.

And every single benefit he has managed to push through for us has been met with a wall of resistance that gives no quarter. The Republican Party with their abuse of the filibuster and their constant defeat of every single move Obama makes is who you should be asking these questions of. I could go on but I won't waste my time.

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Response to lunatica (Reply #16)

Wed May 23, 2012, 08:15 AM

33. Well said! nt

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Response to lunatica (Reply #16)

Wed May 23, 2012, 08:24 AM

35. Thoughtfully put.

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Response to lunatica (Reply #16)

Wed May 23, 2012, 08:32 AM

40. +1

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Response to lunatica (Reply #16)

Wed May 23, 2012, 08:34 AM

44. +1

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Response to lunatica (Reply #16)

Wed May 23, 2012, 09:40 AM

62. Exactly

Obama has had to deal with a "Just Say No to Obama's Policies" Congress for his entire term.

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Response to lunatica (Reply #16)

Wed May 23, 2012, 10:19 AM

76. I grant you that Obama has faced an obstructionist Congress the

 

likes of which we have not seen since the Congress faced by Harry S. Truman from 1945-48.

I'm glad that the government helped you stay in your condo. Sounds like you were really stressing out about it.

As to whether I would have "let the banks collapse," I would like to reply with an admittedly wishy-washy "I don't know" right now. We had mechanisms in place already (the FDIC) to make depositors whole. So a 'bank collapse' as I understand it means that the shareholders and bondholders of the bank would get wiped out.

Grantcart up thread has provided some information that suggests that the existing FDIC mechanisms might not have been sufficient to make depostiors whole, such was the magnitude of the crisis. If that indeed were the case, then I would have instead argued that the banks be 'nationalized' as part of the bailout and the banks' assets become the property of the people of the U.S. (in essence, wiping out share- and bondholders of the banks).

On a personal note, your tone here and in posts upthead ("making a dent in the education of the OP" suggests you are really angry at me. I apologize ahead of time if anything I have written has given offense. Please understand it was inadvertent.

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Response to lunatica (Reply #16)

Wed May 23, 2012, 06:10 PM

136. If I'm not mistaken.....

the Republics merely threaten to filibuster, and the Dems quiver in fear and cave. It'd be nice if something would get filibustered...it would show the people who the repbublics really are.

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Response to kurtzapril4 (Reply #136)

Thu May 24, 2012, 05:42 AM

143. Just like they threatened to not raise the debt ceiling right?

A threat can fuck you over just as much as the real action does. If you think for one second that letting them follow through on a filibuster is the right action then you haven't been paying attention. Our credit rating as a Nation has been downgraded on their threats, and good old boy Boner is threatening it again.

Yeah, lets just let them really ruin the country by calling their bluff.

But then do you think that's Obama's fault too?

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Response to coalition_unwilling (Original post)

Wed May 23, 2012, 05:51 AM

19. Shareholders/Bondholders = Depositors...

The bail out not just saved the bacon of the 1% but millions of people whose savings and retirement funds were in these banks. For the most part those who didn't panic and bail out of the market and their IRAs and other funds have seen their portfolios back to about where they were (or higher) than when President Obama took office in '09.

Had the banks totally failed we would have seen far more suffering as millions of retirees would have seen their lifelong savings wiped out and there would have been far less capital than there was to help the economy begin to revive. So do you think that someone's grandparents or those who worked for years to build a nest egg are a "subsection of society" that got special treatment?

When I go into my branch bank I don't see high rollers running around but "average" Joes and Janes who could have seen all they worked for wiped out...and do you think the Rushpublicans would have lifted a finger to help?

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Response to KharmaTrain (Reply #19)

Wed May 23, 2012, 08:35 AM

45. +1

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Response to KharmaTrain (Reply #19)

Wed May 23, 2012, 09:55 AM

69. Exactly, banks contain collection of all our funds

some people seem to treat banks as if all of the money belongs to the capitalist elite. Maybe a lot of it does, but they can afford to lose it whereas Jane and Joe can't.

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Response to KharmaTrain (Reply #19)

Wed May 23, 2012, 10:23 AM

78. The average "Joes and Janes" you reference were already

 

protected by FDIC insurance for depositors, I think. You seem to be suggesting that the FDIC could not have met its obligation to make these depositors whole.

Am I reading you correctly?

I'm talking more about who actually owns the banks (the share-holders who own stock) and why they got a bailout instead of getting wiped out the way other investors in other segments of the economy would.

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Response to coalition_unwilling (Reply #78)

Wed May 23, 2012, 11:29 AM

99. FDIC Only Covered Up To $250,000

Firstly...that's the limit the FDIC covers on bank deposits not the entire amount in your account. The bank would not be liable to cover assets lost over that amount. Initially the FDIC only covered up to $100k and that level was extended temporarily to 250k in 2008 (as part of the bailout). While 250k sounds like a lot of money, it's barely enough for for someone at 65 in good health to fully retire on...even with social security (assuming that person will live at least another 15 years and need a minimum of $30k a year to live on comfortably).

Next...when one bank goes down, they all do. Thus the bail out avoided a major run on the banks and a failure of the system. The FSLIC (remember those initials??) was overwhelmed during the S & L crash and failed to the point where the system was eliminated. The bailout of the banks preventing the FDIC from facing a similar situation.

You fail to understand that the owners of most banks are the depositors who are the "share-holders". It's the rushpublican position to let things fail...social Darwinisim. Is that what you're hoping to see happen? I've been a strong advocate for investigating, indiciting and jailing those who abused the system that led to the crash and to re-institute laws like Glass-Seegal and other regulations on banks, but I supported the bail out when it happened and still do as it prevented a 1929 type catastrohpe from happening. What we've endured is bad but it could have been a hell of a lot worse.

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Response to KharmaTrain (Reply #99)

Wed May 23, 2012, 11:41 AM

105. Actually, it's those who own shares of stock in banks who are the 'owners' of the banks, not

 

Last edited Wed May 23, 2012, 04:26 PM - Edit history (1)

the depositors.

For example, I bank with Wells Fargo but I do not own any shares of WF stock. While I am a depositor at WF, I in no way am an owner.

Likewise, I own (through my IRA) a few shares of stock in Bank of America but I do not bank there. Thus, I am an 'owner' of BofA without being a depositor.

*****************

When investors invest money in companies like banks, they willingly and knowingly take on risk that their investment may go sour in return for the expectation of a higher reward than they would get by depositing their money in an insured bank account. So when the shit hit the fan, those who owned shares of stock in banks should have gotten wiped out. Instead, while they kept the private rewards from their investment (salaries and bonuses for management, dividends for shareholders), their risk was socialized (spread across the whole of society).

Was it fair and appropriate that this 'privatization of reward, socialization of risk' take place only for the banks but for no other segment of society. AIG also got like treatment, even though it is an insurance company and not a bank.

I agree it could have been a hell of a lot worse and would have been had McCrazy been elected.

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Response to coalition_unwilling (Original post)

Wed May 23, 2012, 05:57 AM

20. This isn't about Obama, this is about the economy itself

Quite simply, the U.S. economy, and by definition the world's economy, is completely tied to the credit and monetary flow of the world's major banks.

If those banks fail, the nations who depend upon these banks for loans and credit would collapse if it dried up.

There's a reason why these institutions are called "Too big to fail".

They'll hold the totality of human existence on this planet hostage for as long as all nation-states depend on them for the maintanence of currency and credit.

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Response to coalition_unwilling (Original post)

Wed May 23, 2012, 06:04 AM

21. Foolish, divisive question. The banks are the repository of society's wealth....

 

... if they fail, everyone fails and middle class savers will be hurt the worst.

Your posts frequently appear to be designed to disrupt rather than support this forum. Perhaps you should consider that you're not DU material.

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Response to Scuba (Reply #21)

Wed May 23, 2012, 10:27 AM

79. Wow, why don't you alert on the thread if you're

 

so convinced of my bad intentions?

My question here is little different from the ones posed by Nobel Laureate Jospeh Stiglitz in Freefall, the substance of which informed my OP. But I guess Nobel Laureates are also personae non grata here at ScubaUnderground.com

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Response to coalition_unwilling (Original post)

Wed May 23, 2012, 06:59 AM

23. I may be confused but why ask Obama Supporters?

I honestly believe the bank bailout was bush's in 2008 right before Obama won?
http://www.nbcwashington.com/news/business/Bush-Bank-Bailout-Overpaid-by-Billions-Study.html

http://www.huffingtonpost.com/robbie-gennet/bush--not-obama--enacted_b_678682.html

If you refer to the auto industry, it is my understanding bush was "giving" them money without asking for anything, repayment etc. When Obama came in he actually made them restructure under the terms of a Loan, which is now nearly all paid back and the company(s) are currently doing quite well.

I may be confused, but this is my general understanding.

TARP=bush
Auto Loans w/repayment requirements = Obama.

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Response to fredamae (Reply #23)

Wed May 23, 2012, 10:30 AM

80. Well, the policy of bank bailouts begun under Bush continued

 

under Obama without significant correction or modification.

But you're absolutely correct that they began under Bush.

The whole alphabet soup of various rescue programs (TARP, TANF, QE 1, QE 2) is a policy wonk's nirvana but the bane of my existence. If I have mis-stated the historical record, please correct me.

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Response to coalition_unwilling (Reply #80)

Wed May 23, 2012, 01:05 PM

113. I responded to this on a separate post

 

Well, the policy of bank bailouts begun under Bush continued under Obama without significant correction or modification
I don't think I agree with this statment at all.

I remember clearly the serious issues the GOP had when Obama placed oversight and restrictions and accountabily on the 2nd half of the bail out money. They were calling for no accounting since it was impossible to track they flow of funds.

Bush's 1st half of the bail out money disppeared in short time, to the tune of billions, with no trace...and what was laft was not used for the purposes intended instead offering salaries and bonuses to the bank executives.

I suppose I could research some links, but I can't imagine everyone has completely fogotten about that huge fiasco.

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Response to Sheepshank (Reply #113)

Thu May 24, 2012, 02:21 AM

139. You know, upon reflection, I think you are 99% correct here and I was 99% incorrect. Specifically,

 

Obama did insist upon more accountability that had not been part of the 'blank check' that Henry Paulson demanded when Bush was Prez. As soon as I read what you wrote, it triggered some memories I also have of those howls of outrage from the Repigs at the quaint and obsolete notion of 'accountability'.

That said, in March 2009, Obama's administration launched the Public-Private Investment Program. This was basically a re-iteration of TARP (with some accountability missing in the original) to the tune of $75-100 Billion. So TARP continued under a different guise but on a smaller scale also than in its original iteration.

Both TARP and PIPP were predicated on the assumption that banks would resume lending if only their toxic assets could be offloaded onto the public. I would have to say as of today that the verdict is still out on whether that assumption was valid.

No need to research links as far as I'm concerned.

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Response to coalition_unwilling (Original post)

Wed May 23, 2012, 07:20 AM

25. Yeah, Fuck Detroit, don't bail out the autoworkers!

Fuck construction, don't roll huge infrastructure projects!
Fuck energy, don't invest in huge new alternate energy!
Fuck students, don't create huge alternate loan payment rules!
Fuck homeowners, don't revamp the whole industry!

Your premise is full of FAIL, there were an insane amount of across the board bailouts.

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Response to boppers (Reply #25)

Wed May 23, 2012, 07:49 AM

28. Nobody bailed out "the autoworkers"; the UAW contract was broken, and "dual tier" wages were

introduced.

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Response to Romulox (Reply #28)

Wed May 23, 2012, 10:50 AM

90. +1

Detroit schools need a bailout. But, that would open up a can of educated people.

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Response to Romulox (Reply #28)

Wed May 23, 2012, 08:07 PM

137. Two tiers was better than no tiers.

Bigger point being that money and bailouts didn't just go to banking.

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Response to coalition_unwilling (Original post)

Wed May 23, 2012, 07:42 AM

26. Is is a bailout if they paid it back? n/t

 

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Response to B2G (Reply #26)

Wed May 23, 2012, 07:50 AM

29. Banks generally charge a premium ("interest") for the use of money. Paying back the principle

alone is still a bailout.

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Response to Romulox (Reply #29)

Wed May 23, 2012, 08:33 AM

42. Principle was paid back with interest, don't see this as a bail out

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Response to uponit7771 (Reply #42)

Wed May 23, 2012, 09:26 AM

59. Not *Market rate* interest. That was the entire point in having the gov't intervene;

if the banks could've borrowed at market rate, no bailout would've been necessary.

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Response to coalition_unwilling (Original post)

Wed May 23, 2012, 07:45 AM

27. A question for you.

Why do you start out with a false premise to base an discussion on?

The "Obama Banker Bailout" theme has already been done to death by the Teabaggers, although Mr. Obama wasn't even president when it was implemented.

See the results of any liquidity crisis throughout modern economic history, and see who gets hurt the most in allowing central banking to fail.

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Response to Ikonoklast (Reply #27)

Wed May 23, 2012, 07:51 AM

30. SENATOR Obama was a huge supporter of the bankster bailouts. Do you think people don't remember?

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Response to Romulox (Reply #30)

Wed May 23, 2012, 08:39 AM

46. can you provide the actual Bill Number? n/t

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Response to fredamae (Reply #46)

Wed May 23, 2012, 08:44 AM

51. I don't have the bill number but I remember that McCain wanted to suspend the Presidential Campaign

so that he could focus on the bailout.

He didn't want to debate Obama again and used the bailouts as an excuse. So if a teabagger type thinks that this happened during the Obama administration remind them that it was a BIG issue during the campaign and one that McCain totally screwed up (probably one of the things that cost him the Presidential election).

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Response to LynneSin (Reply #51)

Wed May 23, 2012, 09:04 AM

54. What we didn't know then......

http://www.huffingtonpost.com/robbie-gennet/bush--not-obama--enacted_b_678682.html

The R's were All for it under the bush admin, then when it came time for the second half of the spending from this massive bailout, seems everything changed...
I'm still looking for the actual bill they voted on before Obamas election

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Response to fredamae (Reply #54)

Wed May 23, 2012, 10:52 AM

91. Without too much research, my recollection

 

Last edited Wed May 23, 2012, 12:31 PM - Edit history (1)

Is that both parties agreed (albeit heistantly and not without reservation) that the bailout was necessary and would be split over two the Presidencies. Share the kudos but also share the risk.

One of the big differences between Bush and Obama's administration of the bail out money, is that Bush's influx of funds almost immediatley disappeared and much of the remainder was not used for the purpose intended. The first order of business seemed to be to pay the executive salaries and bonuses for the mismanagment of the institutions. GOP seemed ok with that.

Under Obama, the second influx of bail out money came with strings attached, oversight implemented and accountability required.

The Reps hated that in part because of the continued meme that less regulations are better, but also in part because the oversight drew attention to the disappearing bail out money of which billions are still unaccounted for. The GOP was not ok with that and let everyone know.

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Response to fredamae (Reply #46)

Wed May 23, 2012, 09:24 AM

58. This is the bill. Obama didn't just *vote* for it--he lobbied his fellow Senators.

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Response to Romulox (Reply #58)

Wed May 23, 2012, 09:54 AM

66. I don't know that he lobbied

but I agree he along with a Majority did vote to approve it amidst loud public objections.

I admit I know little about finance, but I know enough to know this was/is a bad move on the surface.
What I don't know is what would have happened had these steps not been taken.
I guess my question is: Were We, the people late to the party by allowing this crises to build to the point of banksters getting "too big to fail"?
There were plenty of people during the last 30 years to warn us of this looming crises, (since Reagan) but clearly there was not enough people who believed the "impossible in America was possible". We are obviously awake and have placed the focus upon it now.

By the time This bad idea came along was it in fact too late to do anything else?
Who's opinion of "fact" can we trust, especially those of us who are not finacial wizards?

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Response to Romulox (Reply #30)

Wed May 23, 2012, 04:10 PM

122. Did he sign TARP into law as president?

No.

I am well aware of where he stood on the issue. My senator, Sherrod Brown, also voted for it.

I am glad that Mr. Obama voted to save our banking system from catastrophic collapse. The banking, credit, and investment system of every country on Earth would have gone down like dominoes; we barely missed that fate as it is and are currently suffering the aftershocks.

You didn't answer the other half of the question.

No one ever gives an answer to that.

They can't.

Total economic collapse was the alternative, and that is what both the Far Right and the Far Left were hoping for, because they see opportunity in misery and political and economic chaos.

Try running a modern economy with credit locked up, see how that works for you.

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Response to coalition_unwilling (Original post)

Wed May 23, 2012, 07:52 AM

31. The answer is that it would've been ARMAGEDDON if James Dimon hadn't lived to lose another $3 Bil

That's "one of the best bankers we got"!!!!

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Response to coalition_unwilling (Original post)

Wed May 23, 2012, 08:25 AM

36. Since you refer to 'Obama or his supporters' I take it you're not one?

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Response to WI_DEM (Reply #36)

Wed May 23, 2012, 08:31 AM

39. Not everyone here is an Obama supporter

For alot of DUers he is to far to the right on many issues. Not being a supporter doesn't mean someone won't vote for him.

I am not a supporter. The President will get my vote because the Republican candidate would be far worse.

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Response to Marrah_G (Reply #39)

Wed May 23, 2012, 08:51 AM

52. Wha? He's not far to the right on any issues. MAYBE a centrist on some but far to the right??

Find me someone on the far right who is for equality, education, women's issues, gay marriage, taxing the rich, ending the wars, saving the auto industry and manufacturing in general, regulating Wall St., concerned about the environment, cares about the middle class, extends food stamps and unemployment for struggling families, pro-choice, etc etc etc.

Where do you people come up with such nonsense?? You're not a supporter?? This place has gone crazyyy.

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Response to FarLeftFist (Reply #52)

Wed May 23, 2012, 09:39 AM

61. You're certainly not "far left" if you don't understand Marrah's response.

Yes, we will vote with you. I tend to be a supporter in spite of the fact that Obama's actually governed pretty conservatively (which is not the same thing as being a conservative). I think he's the best we have in terms of electability. Hopefully we are growing more for 2016.

There is a wide range of views of those who support Obama and I think for many of us it comes down to doing the best we can given the economic and political systems we are dealing with here.

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Response to TBF (Reply #61)

Wed May 23, 2012, 10:16 AM

75. I don't think you understand Marrah's response at all. And certainly don't tell me what I am.

Like any of you know WTF you're talking about. Pres. Obama is the most progressive president of your lifetime.

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Response to FarLeftFist (Reply #75)

Wed May 23, 2012, 10:35 AM

82. Which is saying a lot about my lifetime,

and little about anything else.

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Response to FarLeftFist (Reply #52)

Wed May 23, 2012, 12:14 PM

109. Taxing the rich? Is that why he let the Bush Tax Cuts expire?

 

Please, don't bother with the 'unemployment benefits' line. There's never been a more transparently phony piece of political cover. The Republicans had backed off that threat repeatedly in the past, and the issue of extending the Bush Tax Cuts was a loser.

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Response to Marr (Reply #109)

Wed May 23, 2012, 04:21 PM

124. Except the GOP majority held tax cuts for the middle class hostage as well.

Compromise makes him a centrist on the issue, not "far right". That was the point here.

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Response to FarLeftFist (Reply #124)

Wed May 23, 2012, 05:44 PM

133. So you categorize Bush's tax policy as "moderate"?

 

He bundled small tax cuts for the middle class along with massive tax cuts for the wealthy, too.

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Response to FarLeftFist (Reply #52)

Wed May 23, 2012, 01:18 PM

118. On issues of national security he is very right wing.

He uses drone strikes far more than Bush did, he didn't veto the Patriot Act extensions, he assassinates U.S. citizens abroad. So, on national security and civil liberties, he is very right-wing.

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Response to white_wolf (Reply #118)

Wed May 23, 2012, 04:23 PM

125. He ended torture and ended the Iraq War. Again, a CENTRIST.

And those things don't drag him to the "far right" over his other accomplishments that drag him further left.

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Response to FarLeftFist (Reply #125)

Wed May 23, 2012, 04:42 PM

129. They can say the Iraq War is over all they want, but...

until every single member of the U.S. military and every U.S. private contractor is gone, it isn't over.

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Response to white_wolf (Reply #129)

Sun May 27, 2012, 09:11 AM

176. Does that mean the US is still fighting WW 2 considering where you have troops? n/t

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Response to WI_DEM (Reply #36)

Wed May 23, 2012, 10:36 AM

83. I will vote for 0bama as I've said repeatedly ad nauseum, because

 

a Romney adminsitration would simply be an unmitigated disaster for the working class and the globe.

That said, my 'support' for Obama has cooled markedly since the euphoric days of 2008. To wit, I will not be donating any $$ to his campaign this time around, nor will I be volunteering for him.

I used that phrase because (as Grantcart's response upthread demonstrates) I know there are many on DU who still fervently support Obama and figured they would be best suited to mount a defense of his actions and policies.

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Response to coalition_unwilling (Original post)

Wed May 23, 2012, 08:29 AM

38. Bush signed TARP and bailed out the banks. The states got stimulus.

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Response to coalition_unwilling (Original post)

Wed May 23, 2012, 08:34 AM

43. *****OBAMA DID NOT DO BAIL OUT IT WAS BUSH, OBAMA DID STIUMULUS*******

Faux News has taught people well...

Frank Luntz is an asshole

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Response to coalition_unwilling (Original post)

Wed May 23, 2012, 08:41 AM

49. Bailout was bipartisan. The mess was created by a Republican Admin with Republican policies.

Maybe it's good you asked this question so we can straighten you out. Many people are susceptible to republican revisionist history. They spread these lies all the time on Republican news channels like Fox News.

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Response to coalition_unwilling (Original post)

Wed May 23, 2012, 08:42 AM

50. Just so everyone is clear - Obama was a US Senator when the bank bail-outs happened

Just saying.

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Response to coalition_unwilling (Original post)


Response to coalition_unwilling (Original post)

Wed May 23, 2012, 09:07 AM

55. It seems to me the auto-bail-out

is being completely disregarded here. Oh wait, that was a positive. Nevermind.

Julie

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Response to JNelson6563 (Reply #55)

Thu May 24, 2012, 02:52 AM

141. +1 hear, hear, Julie!!

Oh wait, that was a positive. Nevermind.




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Response to coalition_unwilling (Original post)

Wed May 23, 2012, 09:35 AM

60. Agree - hell of a mess GWB got us into

not that capitalism is great to start with. Personally I hope we evolve to socialism sooner rather than later. I wouldn't address the question to Obama et al though - I'd address it to everyone. President Obama is doing pretty well as an administrator given our reality at this point in time. It's going to take a lot more than one person to resist this system and get things on a better course.

I know I'm not being very specific, I really can't on this site. But I can say for day-to-day we are doing better with Obama at the helm than we would be with many others. Conditions will dictate when folks rise up, my guess is that it will happen pretty quickly, and the most many of us can do is try to be ready.

I applaud you for trying to start such a discussion here though. Solidarity.

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Response to TBF (Reply #60)

Wed May 23, 2012, 10:39 AM

84. OMG, if McCrazy had been elected in 2008 or the Romuloid in

 

2012, we'd be easily looking at unemployment of 25%.

There are times when holding one's nose and voting the lesser of two evils is not Machiavellian but instead a civic duty.This is one of those times.

Thank you for your kind words, though. Much appreciated.

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Response to coalition_unwilling (Original post)

Wed May 23, 2012, 09:54 AM

67. Banks keep the money, and if they fail

it could be like the old fashioned "run on the bank." Then everything collapses. Everyone loses the money they had in the bank. People keep cash under pillows. Banks are part of the advanced economy. There were banks in the 18th century. We could go back to a barter system, but how would that work nowadays? The banks are a basis and saving them allows all the other smaller businesses to be saved - it is their money in the banks. To go through and save each business independently would allow time for the collapse to occur.

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Response to treestar (Reply #67)

Wed May 23, 2012, 10:42 AM

86. Good points. We did have a mechanism already in place (the FDIC) that

 

would have made depositors whole in the event of a bank failure.

Others upthread have intimated that the scale of the crisis was such that the FDIC might not have been able to meet its obligations to depositors. If that indeed is true (that the FDIC could not meet its obligations to depositors), then I agree with you and defenders of the bank bailouts 100%.

If the FDIC was sufficient, then why did those who owned shares of stocks in banks get rescued while ordinary Joe Blow with an underwater mortgage get foreclosed upon?

It seems unfair and unjust.

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Response to coalition_unwilling (Reply #86)

Wed May 23, 2012, 12:32 PM

110. The FDIC was clearly not sufficient

 

the amount of total deposits in Citigroup and Bank of America (to name two that ended up being substantially owned by the taxpayer following the events of the 2007-2008 crisis) exceeded the total amount of the FDIC insurance fund by a factor of about 20. Bank of America alone had total deposits of $883 billion in 2008; the FDIC insurance fund at the time was $53 billion. That's just one bank. These numbers are readily available, by the way.

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Response to Spider Jerusalem (Reply #110)

Sun May 27, 2012, 12:15 PM

182. Understood, but if the problem was that the FDIC was underfunded, there

 

were ways to remedy that situation (merely increase allocations for the FDIC or raise the premiums banks pay for its protections, among others). No need per se for TARP and its later progeny. Unless I'm missing something which I may well be.

BTW, either my laptop, this thread or DU is a bit buggy this a.m., as I cannot see your reply in the thread. Maybe there's a limit to the number of posts that can be displayed?? At any rate, apologize if I'm not responding substantively to your point. Not my intention.

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Response to coalition_unwilling (Reply #86)

Sun May 27, 2012, 11:52 AM

180. I agree about the ordinary Joe being foreclosed upon

Though again that is thousands of individuals, harder to manage it.

Has there been any bill passed that allowed for mortgage modification? I thought there were some efforts in that direction. Even the banks themselves don't have an interest in a slew of empty houses, so even they might work with the mortgagors and some have, I thought.

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Response to coalition_unwilling (Original post)

Wed May 23, 2012, 10:20 AM

77. This is the way it always is. Nothing to do with Obama.

It's always about protecting individual investors.
Not the richest shareholders or hedge funds. That's why everyone should be in the stock market. Then even if you have a nickel in it when a giant amount of cash is given to bankers you can rest assured your being helped as well. And really, it's for your sake it was even considered in the first place.

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Response to coalition_unwilling (Original post)

Wed May 23, 2012, 10:35 AM

81. As it turns out......

 

there were plenty of "non Obama supporters" that supported the need to bolster up the financial institutions. You may get some interesting info from the Bush side of things since he infused the first portion of the $700B bailout program.
http://articles.cnn.com/2008-09-24/politics/bush.bailout_1_bailout-proposal-rescue-plan-mortgage-related-securities?_s=PMOLITICS

The title of your OP is incredibly rude and short sighted. In fact it says much more about your inabiliy to try and objectively gather real facts, in favor of judgemental labelling.

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Response to Sheepshank (Reply #81)

Wed May 23, 2012, 10:53 AM

92. Well, a jury of my peers voted 1-5 to leave it standing (see below), so

 

I'm not sure about the 'incredibly rude and short-sighted' part.

The OP was informed by my reading Nobel Laureate Joseph Stiglitz' Freefall. If the questions Stiglitz raises are no longer welcome here . . .

I asked Obama supporters to respond because I figured Obama detractors would not argue well for the bailouts. The response by Grantcart upthread more than adequately demonstrates the soundness of my reasoning.

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Response to coalition_unwilling (Reply #92)

Wed May 23, 2012, 11:57 AM

107. I didn't call for any sanction of your op...

 

that would be your own defense mechanisms adding that statement, as if that was the inclination of my comment. Not so.

But to assert that only Obama supporters, of which you are apparently not one, agree that the bailout was necessary is short sighted, and frankly accusatory and rude. You were treated with more respect by Grantcart than you offered to the a large portion of Obama supporters on Du. While you feel comfortable with you the way to stated your assertion, so do I.

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Response to coalition_unwilling (Original post)

Wed May 23, 2012, 10:45 AM

87. OP was alerted. Here are the results

 

At Wed May 23, 2012, 10:39 AM an alert was sent on the following post:

A question for Obama and\or his supporters here:
http://www.democraticunderground.com/1002718381

REASON FOR ALERT:

This post is disruptive, hurtful, rude, insensitive, over-the-top, or otherwise inappropriate. (See <a href="http://www.democraticunderground.com/?com=aboutus#communitystandards" target="_blank">Community Standards</a>.)

ALERTER'S COMMENTS:

Aren't we all Obama supporters here in the midst of this election? This OP is divisive.

You served on a randomly-selected Jury of DU members which reviewed this post. The review was completed at Wed May 23, 2012, 10:43 AM, and the Jury voted 1-5 to LEAVE IT.

Juror #1 voted to LEAVE IT ALONE and said: No explanation given
Juror #2 voted to LEAVE IT ALONE and said: No explanation given
Juror #3 voted to LEAVE IT ALONE and said: A question about an important issue is now to be censored? Please, what a waste of time this alert is.
Juror #4 voted to LEAVE IT ALONE and said: No explanation given
Juror #5 voted to HIDE IT and said: Snipping two parts together of the OP: "A question for Obama and\or his supporters here...I ask this question not to snark at Obama or his supporters but out of genuine curiosity."

I call bullshit. It IS snark and call out of Obama supporters and the additional implied queston is "So why are you still supporting him".

There is also a lie thrown into this. President Obama did not bail out the banks and the OP blames him and seeks to get us to blame him for it.

How many good reasons is that to hide this OP? At least three.
Juror #6 voted to LEAVE IT ALONE and said: This is a place to explore questions like this.

Thank you very much for participating in our Jury system, and we hope you will be able to participate again in the future.

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Response to stevenleser (Reply #87)

Wed May 23, 2012, 10:56 AM

93. Thank you for posting. With regard to Juror #5, I guess I should

 

have asked "Obama detractors" to defend Obama's policies. Maybe I should never have cracked the jacket of Joseph Stiglitz' Freefall. Silly me, thinking a Nobel Laureate might actually have some salient points and observations to make.

To the jurors who voted to 'Leave it,' I say 'Thank you.' Language is such a delicate thing and the words we choose (or not, as the case may be) have such power to offend. I need to be constantly reminded of that, even on a free-wheeling site like DU.

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Response to coalition_unwilling (Reply #93)

Wed May 23, 2012, 11:16 AM

95. I am Juror #5. I particularly object to your blaming Obama for TARP, a Bush law and then

 

calling out Obama supporters to defend it as if it was Obama's law. That alone is hideworthy, IMHO.

http://en.wikipedia.org/wiki/Troubled_Asset_Relief_Program

The Troubled Asset Relief Program (TARP) is a program of the United States government to purchase assets and equity from financial institutions to strengthen its financial sector that was signed into law by U.S. President George W. Bush on October 3, 2008. It was a component of the government's measures in 2008 to address the subprime mortgage crisis.

.
.
.
Expenditures and commitmentsAs of February 9, 2009 (2009 -02-09)[update], $388 billion had been allotted, and $296 billion spent, according to the Committee for a Responsible Federal Budget. Among the money committed, includes:[37]

$205 billion to purchase bank equity shares through the Capital Purchase Program;[38]
$40 billion to purchase preferred shares of American International Group (AIG), then among the top 10 US companies, through the program for Systemically Significant Failing Institutions ($40 billion spent);
$20 billion to back any losses that the Federal Reserve Bank of New York might incur under the Term Asset-Backed Securities Loan Facility (none spent);
$40 billion in stock purchases of Citigroup and Bank of America ($20 billion each) through the Targeted Investment Program ($40 billion spent)
$12.5 billion in loan guarantees for Citigroup ($5 billion) and Bank of America ($7.5 billion) through the Asset Guarantee Program (none spent);
$25 billion in loans to automakers and their financing arms through the Automotive Industry Financing Program ($21 billion spent)
Bank of America repaid the government two payment loan of $45 billion in December 2009. This TARP loan was given to Bank of America in two payments of $25 billion in 2008 at the beginning of the financial crisis and $20 billion early 2009.[39]

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Response to stevenleser (Reply #95)

Wed May 23, 2012, 11:23 AM

96. Hmm, maybe I have been mis-construing Stiglitz' book, or maybe

 

Stiglitz himself has gotten it wrong. He certainly finds fault with the way Obama managed the banking crisis after his inauguration, specifically by not forcing banks into standard liquidation.

Before I continue down this vein, have you read Stiglitz' Freefall? (Don't want to use a book that you may not have read.)

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Response to coalition_unwilling (Reply #96)

Wed May 23, 2012, 11:40 AM

102. A couple of points

 

#1 - The buck for TARP stopped at the desk of George W. Bush, as it always does with who is President when a bill passes. Can we assign some blame to individual members of congress and the senate who may have voted for something? Perhaps, but it is petty (not to mention reaching) in an elections season after four years in office to start sniping at the President for his senate voting record.

#2 - Do I think there was another way to handle it? Sure. I would have preferred a consumer bailout, and I said so here http://www.opednews.com/articles/The-Real-Bailout-Needed-is-by-Steven-Leser-081227-715.html . I believe this would have also had the effect of bailing out the banks and financial institutions because it would have paid off vast amounts (several trillions of dollars) of consumer debt, flooding lending institutions with liquidity. The difference is that the American middle class/working class, however you want to call them would be in excellent financial health now and not only not have lost their homes but would now own them outright providing them additional collateral and net worth.

#3 - Do I think people who implemented TARP were bad or evil? No. It was a massive problem with the potential to cause a complete meltdown that if not addressed would have caused horrific suffering, starvation and worse. I enjoy any opportunity to make legitimate digs at the Bush administration, but I think they acted in good faith here, even if I would have preferred a different way.

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Response to stevenleser (Reply #102)

Wed May 23, 2012, 01:06 PM

115. This *precisely* the kind of conversation you voted to cut off. Should your post be alerted?

Of course not.

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Response to Romulox (Reply #115)

Wed May 23, 2012, 01:09 PM

117. No, it isnt. I voted to cut off a post that blames Obama for something Bush did. Nice try though.

 

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Response to stevenleser (Reply #117)

Wed May 23, 2012, 01:23 PM

119. I think your technique of denying the obvious leaves no room for an actual exchange.

Why type a long reply to you, when you refuse to acknowledge plain fact, such as Senator Obama's vote in support of the TARP?

It's a monumental waste of time. But I *still* wouldn't stoop to alert on you because of it--or vote to hide your post--as counterproductive as this technique is.

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Response to Romulox (Reply #119)

Wed May 23, 2012, 04:18 PM

123. I think it is you who refuses to acknowledge that TARP was passed under Bush and therefore

 

it is he who is primarily to blame for its passage.

Truman said the buck stops here. It stops at the President's desk.

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Response to stevenleser (Reply #102)

Thu May 24, 2012, 02:37 AM

140. I think I agree with all 3 of your points here, strange as that may sound. Well, I might have a few

 

petty cavils on #3, especially with regard to Henry Paulson who still to this day gives me the creeps. The AIG bailout ended up sending a lot of pass-through funds to Goldman Sachs (b/c of payouts on credit default swaps) and I've felt that needs to be investigated thoroughly.

As to point #1, I would point out that Obama's administration in March 2009 launched its own version of TARP (called the Public-Private Investment Program) that actually used funds appropriated for TARP. But you're absolutely correct that TARP was signed into law by Bush after his administration lobbied Congress heavily for it.

I think my OP question (or maybe the spirit behind the words anyway) was pointed toward your point #2, that if bankers (and their share- and bondholders) were to be bailed out, that other segments were as deserving or more deserving of a bailout also, questions of 'moral hazard' be damned.

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Response to stevenleser (Reply #95)

Wed May 23, 2012, 11:23 AM

97. Senator Obama voted for TARP, and lobbied his fellow Senators for its passage. You're misinformed.

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Response to Romulox (Reply #97)

Wed May 23, 2012, 11:24 AM

98. I'm not misinformed. I know he was not President when it passed. nt

 

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Response to stevenleser (Reply #98)

Wed May 23, 2012, 11:33 AM

101. You spoke of "blaming Obama for TARP"--he is responsible for his vote as Senator, as well as

his advocacy that other Senators support it.

That's in addition to the fact that 1/2 of the TARP funds were spent under his watch.

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Response to Romulox (Reply #101)

Wed May 23, 2012, 11:40 AM

103. See my #102

 

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Response to stevenleser (Reply #103)

Wed May 23, 2012, 01:04 PM

112. Wherein you *finally* explain why you voted to hide a truthful post? I can hardly wait. nt

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Response to Romulox (Reply #101)

Wed May 23, 2012, 11:40 AM

104. The TARP funds were spent under his watch b/c it was signed into law by Bush.

They left the hard part, making sure it gets paid back, to Obama. He also signed into law stimulus, and was blocked with numerous jobs bills that would have helped bail-out main street.

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Response to FarLeftFist (Reply #104)

Wed May 23, 2012, 01:03 PM

111. Senator Obama helped pass it with his vote. I'm not doing the School House Rock thing for you. nt

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Response to Romulox (Reply #111)

Wed May 23, 2012, 04:25 PM

126. Yup. Just like every other sane person. Are you looking for a mentally unstable president? See: Bush

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Response to stevenleser (Reply #87)

Wed May 23, 2012, 10:57 AM

94. Sad that it was

"alerted" on; good that common sense ruled.

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Response to coalition_unwilling (Original post)

Wed May 23, 2012, 11:32 AM

100. Fair question, but didn't Bush bail out the banks? Obama and Congress bailed out the auto industry

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Response to coalition_unwilling (Original post)

Wed May 23, 2012, 01:06 PM

114. You are asking the wrong president. W bailed out the banksters.

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Response to coalition_unwilling (Original post)

Wed May 23, 2012, 01:39 PM

120. TARP occured under Bush

In case you've forgotten.

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Response to Yo_Mama_Been_Loggin (Reply #120)

Wed May 23, 2012, 04:39 PM

128. Actually, I had not forgotten that TARP was passed during the

 

latter days of the Bush administration, with bipartisan support (including then-Senator Obama's) and a lot of arm twisting by the usual suspects.

However, it has always bothered me that wealthy share- and bondholders of banks got special preferential treatment but ordinary people were left to twist in the wind, even after Obama took office, and that is where the original question came from.

I wish the government would bail me out after I engage in excessively risky behavior, but it seems like as often as not, I'm left to suffer the consequences of my risk-taking when things go south, even as I also might enjoy whatever rewards might also come my way if my risk taking proves out. So why were bankers and the banks' stock- and bondholders treated differently? Why didn't they have to face the consequences of their excessive risk-taking?

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Response to coalition_unwilling (Original post)

Wed May 23, 2012, 02:28 PM

121. I see you got your answer

 

1/2 the respondents don't even know what you're talking about, 1/4 are insulted and 1/4 actually tried to answer.

Here's some info those who don't even know what's happened for 4 years:

http://www.pbs.org/wnet/need-to-know/economy/the-true-cost-of-the-bank-bailout/3309/

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Response to coalition_unwilling (Original post)

Wed May 23, 2012, 04:38 PM

127. Because Bush bailed them out - not Obama - so ask the Bush supporters here

yup

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Response to jpak (Reply #127)

Wed May 23, 2012, 04:54 PM

132. According to Joseph Stiglitz, in March 2009, Obama's administration launched

 

a variation of the bailout called the "Public-Private Investment Program" which used TARP funds to execute a new 'cash-for-trash' exchange similar to those we associate with the Bush bailouts.

There are, I would hope, no Bush supporters here. If there are, they have long since been placed on my Ignore list (assuming they've revealed themselves).

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Response to coalition_unwilling (Reply #132)

Sat May 26, 2012, 09:37 AM

170. What horseshit - try again

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Response to jpak (Reply #170)

Sat May 26, 2012, 10:04 AM

171. jpak vs. Nobel Economics Laureate Joseph Stiglitz = gnat vs. elephant. But

 

Last edited Sat May 26, 2012, 10:41 AM - Edit history (1)

thanks for kicking my thread (I guess).

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Response to coalition_unwilling (Original post)

Wed May 23, 2012, 04:50 PM

131. I think that at the time, it was a matter of having no choice but to bail out the Super Banks

 

As a follow through, to experience the consequences of allowing the Super Banks to become too big to fail without dragging down the entire global economy, the direction should have been to declare "too big to fail is too big to exist" and then break up every last Super Bank.

The problem with the bail out is there has been little in the way of follow through. Even if nobody went to jail, and that's a mighty big if, the Super Banks should not exist today and should instead be a lot of regular banks. The regulations that were passed were weak sauce, especially in light of recent events with Chase and Super Bank backers of the Facebook IPO.

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Response to coalition_unwilling (Original post)

Wed May 23, 2012, 05:51 PM

134. I assume it was done largely to try and prevent a full 1929 style crash.

Which it largely appears to have done assuming nothing else traumatic occurs to make things worse like say Mitt getting into office or the Republicans retaining control of congress and or gaining control of the Senate.

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Response to cstanleytech (Reply #134)

Thu May 24, 2012, 02:00 AM

138. OMG, no matter what one may think of Obama's stance vis-a-vis

 

bank, auto or any other type of bailout, I think everyone on this board agrees that a Romney presidency would simply be an unmitigated disaster for this country and the globe.

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Response to coalition_unwilling (Reply #138)

Thu May 24, 2012, 03:30 AM

142. "a Romney presidency would simply be an unmitigated disaster for this country and the globe."

True enough.

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Response to coalition_unwilling (Original post)


Response to coalition_unwilling (Original post)

Sun May 27, 2012, 08:17 AM

174. Because when the Titanic is sinking...


...Bankers first....women and children later.

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Response to kentuck (Reply #174)

Sun May 27, 2012, 10:01 AM

177. Wow, that is an apt metaphor. Or maybe something

 

about rearranging deck chairs on said vessel?

Thanks, though. I think you eloquently captured the whole issue in a few words.


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