Confidence Game

Tear out the front page - a year ago when then-Treasury Secretary Paulson assured us that the first nine banks to receive TARP funds were healthy, not all of them were.  Who coulda guessed?  Honestly - was there anyone out there who thought these banks were getting money because some other banks had problems?

The Times reported the gambit at the time - hide the weak among the mabne not-so-weak:

Bringing together all nine executives and directing them to participate was a way to avoid stigmatizing any one bank that chose to accept the government investment.

Or here:

Indeed, several of the banks represented in the room are in need of capital.

One element of a lie is intent to deceive. Paulson could not have believed he was fooling anyone.

Comments

[bgates]

Paulson could not have believed he was fooling anyone.

By that standard, Obama's not a liar either, since he's so obviously lying always.

[Neo]

It’s still not clear if all or some of them weren’t healthy.

Bank of America and Citigroup had visible problem later, so it was pretty obvious that they probably were in trouble then.

It could be argued that with the cash infusions that these bank were possibly healthy, but considering that virtually no “toxic assets” have been removed from the system, any institution holding Mortgage Backed Securities (MBS) is still potentially in trouble.
Only those MBS-s of the publicly “failed” institutions have been sold off, but that doesn’t really take them out of the system .. they merely changed holders and their level of risk.

The real elephant in the room, that the Congressional commission should deal with is that these MBS-s, which came into being through the CRA (Community Redevelopment Act), guaranteed that eventually the system would suffer a failure, even with good regulation. The underlying problem was trying to put people, who couldn’t pay for a house, into a house. No amount of regulation was going to make that work.

Worst off .. there appears to be a redux in the works .. this is insanity.

[Rob Crawford]

The real elephant in the room, that the Congressional commission should deal with is that these MBS-s, which came into being through the CRA (Community Redevelopment Act), guaranteed that eventually the system would suffer a failure, even with good regulation

Never happen, because Congress was responsible for creating the CRA.

If we're lucky, the civilization that follows ours may be able to adequately investigate the level of corruption and idiocy that led to our collapse.

[bishop]

BECE, right Rob

[Original MikeS]

This is a non-story. The zeitgeist of the nation is that the TARP funds are gone; spent not loaned out.

Is there really some mabne pamby dickweed somewhere out there who thinks the TARP program was primarily low risk ventures that were highly likely to be repaid to the Treasury at a profit?

[clarice]

What's "mabne"?

[Original MikeS]

What's "mabne"?

Mabne I'll tell and mabne I won't.

[Schornick]

I think this is a bit of hindsight myself. There was real panic out there at the time.

I don't much care for CNN, but I thought this was interesting:

WASHINGTON (CNNMoney.com) -- A government watchdog says federal officials weren't entirely honest with the public about the health of the first 9 financial firms that got federal bailouts, according to a report released Monday.

Bailout special inspector general Neil Barofsky says in an audit that Treasury Department officials painted an overly rosy picture, creating "unrealistic expectations," when they called the first bailout banks "healthy" institutions that would be able to lend more with government help.

"It is not our intent to suggest that government officials should make public their concerns over the financial health of individual institutions, but rather that government officials should be particularly careful, even in a time of crisis, of describing their actions (and the rationales for such actions) in an accurate manner," the report stated.

Treasury appeared to disagree with the assessment of the Special Inspector General of the Troubled Asset Relief Program (SigTARP), saying "people may differ" on the phrasing of the original bailout announcements.

"Any review of the announcements must be considered in light of the unprecedented circumstances in which they were made," wrote TARP chief Herb Allison in response to the SigTARP report.

Separately, the new audit looks into charges that federal officials strong-armed Bank of America (BAC, Fortune 500) into completing its planned purchase of Merrill Lynch, even as BofA worried about mounting losses at Merrill in late 2008. Further, the report looks into whether officials pressured BofA to conceal those losses from its shareholders.

Barofsky gives the major players the benefit of the doubt. He acknowledges that Federal Reserve chairman Ben Bernanke and then-Treasury Secretary Hank Paulson wanted the deal to go through, fearing the potential failure of Merrill Lynch and the "collateral damage to the economy."

But Barofsky "found nothing to indicate Treasury and Federal Reserve officials instructed Bank of America executives to withhold the public disclosure of losses."

[Sara (Pal2Pal)]

I had a very odd experience this morning with a bank and my credit card. This is a card I've had a long time but only used twice, the 2nd time this past month for a $30 gas purchase one day when I'd gone off without my bank debit card.

I got the bill for this purchase last Saturday the 3rd, due this coming 17th. This morning I got a call from the credit card people wanting me to pay the min. payment due today to avoid a $35 fee. I balked since my entire balance is only $30 and I wondered why there would be this fee, especially since I owe virtually nothing and I've never been late or had any problems with this card. Asking the question got me transferred to a supervisor who again wanted me to give them a payment today but I could post date it for the 17th. I was still balking at these games so I was told that the reason they do this is that 90% of their customers are considered high risk and dead beats and this system they've instituted helps them collect their money. (Insulting to say the least.) I was then told that the only way I could avoid the extra $35 fee was to pay 14 days early, right then, over the phone. I refused and was told that I would see the fee on my next statement's balance.

First, this does not seem legal. Second, it is more the principle than the actual money of a lousy $30 balance I intend to pay in full anyway. Would you have paid? Should I have paid early?

[Schornick]

OriginalMikeS:

I read the other day that the TARP money is being repaid at a 5% profit. It could be argued that the profit should be higher given the exposure of the taxpayer, but money is being repaid.

[Appalled]

Can you imagine the panic if Paulson/Beranke had said "these banks are dead meat"? You could well have had the "virtual" bank run that brought down Wachovia. or, you could have had the good old fashioned national OMFG!! that followed the crash of Lehman.

The people have not really been levelled with on how bad things were, or still are. But then, our national Levelerer has been busy trying to get us to buy Health Reform, so what can you do?

[Original MikeS]

...TARP money is being repaid...
Yeah. I'm sure there will be some write offs. In the end, Dems will try to reinvest (spend) the repaid money rather than pay down the debt with it. So, the zeitgeist will be correct after all.

[Pops]

"""Bringing together all nine executives and directing them to participate was a way to avoid stigmatizing any one bank that chose to accept the government investment.""""

That was said just so darn nicely...you could hardly tell it was complete utter fascism to force free, healthy institutions to take government borrowed money so the government could then control our banks.

Number one: The government has a fiscal duty to the taxpayer to not spend our money unnecessarily.

Number two: The banks had a fiduciary responsibility to the shareholders, the owners, to not engage in such gimmicks and not allow my assets as an owner to come under government control without damn good reason.

This is big business and government colluding with the little guys money to take anyway any ability of the people to live free and govern their own affairs.

[jimmyk]

I don't remember what was said at the time, but I always had the impression that not all the TARP recipients were healthy, but that Paulson coerced the healthy ones to take the money along with the sick ones so that the sick ones wouldn't be identified and stigmatized (or run on).

Sara, that seems outrageous. I'm guessing they want you to cancel the card because you use it so infrequently that they lose money on you.

[Rick Ballard]

"The people have not really been levelled with on how bad things were, or still are."

Hmmmm... Are you implying that the roughly $875 billion which Uncle Ben has forceFed the banks in order to increase reserves may not be enough? Was it the decline in new loans that tipped you or are you one of those weirdos who can actually count?

[clarice]

Rick, I posted this on another thread..

< ahref=http://www.forbes.com/2009/10/03/community-reinvestment-act-mortgages-housing-opinions-contributors-peter-schweizer.html>CRA Insanity

[Pagar]

This may help: NOT

"500-to-600 More Bank failures"

LUN

[Appalled]

Rick:

All I can say is it had better be enough, because there is no more money to give.

One of the most fundamentally disappointing things about this administration is their inability to cope with changing conditions. Obama and the Dems yakked, yakked, yakked about health care all campaign long, and by golly, never mind that the deficit picture and economy are a little alarming right now, they are going to do this health care thing, come hell or high red ink.

The thing government ought to be doing right now is actually addressing the issues that caused the mess, rather than some secondary issue that is better handled when more pressing matters aren't actually pressing. But, when I look at the list of stuff Obama has on his cue, none of them really get at the issue bothering the economy. This is true, even if you look at things from a leftish point of view.

I am just struck at how peculiar Obama's priorities really are and how they do not align to national priorities. This really does spell train wreck for his administration, and maybe for the economy too.

[Rob Crawford]

The thing government ought to be doing right now is actually addressing the issues that caused the mess

Haven't you heard? They want to extend the sub-prime lending requirements to cover more people and more financial institutions. What better way to "address" the problem than by making it worse?

[megapotamus]

I blame Bush, in large measure but mostly because he occassionally posed as some sort of fiscally responsible actor. McCain was even worse. If he had used the stupid "suspension" of his campaign to say, "WTF!?!?!? You guys are crazed!" rather than signing on for this crap he would have won by five points. But no, oh no. Barack, well what else would you expect? Although I am getting a strange warming sensation seeing the mild grief the Leftoids are giving him over pouring billions into their alleged enemies. Here is a crazy idea, I know, to deal with these so-called toxic assets. Everyone was barking that there was no "market price" for these assets. Hmmm. Would you take 25 cents on the dollar? No? How about 95? Oh, you would? Well friends, in that case we have a bid and an ask and we just arbitrage it until there isn't too much daylight between the two. See, anyone who sez there is no market price for this or that means quite simply that they don't like the market price. Each and every one of these deals was concocted meticulously and at great expense to anticipate every eventuality, yes even that the value of an asset might decrease. Imagine that! So here is my crazy plan... enforce all these deals; every one, exactly as agreed upon. Whoa, that's crazy talk! But anything else just makes the whole thing worse systemically. And everyone knows it, it is just that if you are connected you start thinking that YOU should not have to "take a haircut" as they say. And not only do they not get their haircut they get their shoes shined and their a$$es waxed and it is all on the dime of you and me. Disgusting. Stop it. Stop it all. A deal is a deal and if a deal is NOT a deal then it is the end of deals. It is Thunderdome. Um, actually the rules of Thunderdome are much less arbitrary and damaging.

[Rick Ballard]

"All I can say is it had better be enough, because there is no more money to give."

That's not really true. Uncle Ben can print as much money as he believes necessary. The amount of damage that will be done depends upon the gullibility of the Muddle - will they buy the hoked up feel good news pulled out of the Census/BLS/BEA National Data Suppository or their own lieing eyes?

Even the vampire squid at GS seem to be dancing faster and faster these days - the market is rising on risible volume and their "upgrade" of the banking sector doesn't exactly jibe with the credit contraction numbers. Telling the Straussian lies necessary to keep the Muddle befuddled only works when those telling lies have a modicum of credibility. Paulson got away with something that Geithner can no longer even attempt.

The uncertainty which is keeping the vast majority of businesses from even considering hiring is just the reverse of a medal which has Trust & Confidence inscribed on the face. The fact that they have lost you, Appalled, is as significant a data point as the attempted withdrawal of credit from Sara, whose income is "guaranteed" by Uncle Sugar himself.

"Train wreck" may be too gentle a metaphor. "Giant asteroid strike" may come to fit better in the end.

[Gregory Koster]

Sara, for that small amount, I think I would have paid today and canceled the card. Since you didn't, examine your card agreement to see if there is such a provision. If the fee does show, they likely have a provision saying what state's court you have to use to contest this. If it's out of state, I think you're stuck.In any case, cancel the card, even if this fee never shows. Life's too short to have to put up with that sort of nonsense.

Megapotamus, I think you have the right idea.

[Neo]

An internal review by the board of directors of the community organization ACORN determined that the amount allegedly embezzled from the community organization was $5 million, well more than the previously reported amount of nearly $1 million, according to a new subpoena in an investigation by Louisiana Attorney General Buddy Caldwell.

The subpoena, released this afternoon, says, "It is still unclear if some of the monies embezzled are from state, federal or private funds."

[MayBee]

The thing government ought to be doing right now is actually addressing the issues that caused the mess, rather than some secondary issue that is better handled when more pressing matters aren't actually pressing.

To be fair, the administration has occasionally made the assertion that the fate of our economy is dependent on health care, and that "fixing" health care will fix the economy.
So they know they should be working on the economy. So that's good, right?

[Rick Ballard]

Clarice,

The Forbes CRA piece was entertaining but I think I can top it. This fellow is rather successful at identifying idiocy - scroll down to page 8 if you find his dry wit a bit tiresome. The FHA No Credit Check ad indicates the seriousness of this administration in dealing with "root causes".

The entire piece is excellent for anyone with a modicum of suspicion as to the probability of the actual outcome of this fit of dementia being positive.

[Neo]

Five years ago today at the House Subcommittee on Government-Sponsored Enterprises ...

BARNEY FRANK: I think you just accurately answered the questions that, no, if everything works out as we expect it to, there are no threats, et cetera, this -- you seem to be saying, “Well, these are in areas which could raise safety and soundness problems.” I don’t see anything in your report that raises safety and soundness problems.

[Neo]

This is a story too good to be missed. LUN

The Labor Dept adds phantom jobs during the year to account for those that it thinks weren't reported ("births") and then subtracts "deaths" in January ... next to be reported Feb 5, 2010 .. when we can expect employment to tank.

It will be important for Republicans in Congress not to do anything stupid in December/early-January that could be used to scapegoat them for the big drop in employment coming on Feb. 5, 2010.

[Pofarmer]

I am just struck at how peculiar Obama's priorities really are

He's not doing anything peculiar if you figure he's a fuckin' fascist.

[Pofarmer]

So here is my crazy plan... enforce all these deals;

That was my take, as well. Let it go and pick up the pieces later. I STILL think that would have been the fairest and least expensive option. Why keep rewarding the top hogs at the trough with more slop?