Congress gives some 170 billion to AIG, some 200 billion cumulatively to BofA and Citi, then grandstands in the House and Senate, yelling at the bank CEOs to 'lend the money.'
Either the Congressmen and Senators are giving the Oscar-Award winning performances of their lives, or are completely ignorant of basic economics.
The banks can't lend the money the government has poured into them. That money has to be used to recapitalize their balance sheet, and they can't afford to loan it under even conservative methods, let alone during the worst slump in economic activity since the 40s (anyone who doubts this, look at the acceleration trend in unemployment claims around the globe, manufacturing activity, contraction of GDP in major Western Economies of 10%+ per annum, and just today, an announcement by the Bank of China, formerly warning of hyperinflation, that they can afford to cut central bank interest rates to 'near 0,' as inflation risks have subsided).
As Landis and Makloda have aptly stated, the strongest argument to bailing out megabanks with major counter-party risk like BofA and Citi is that not doing so would take down those institutions who they owe money to, whether Goldman Sachs, JP Morgan or Republic Bank of Toledo.
However, even if one were to conclude that the systemic shock waves to the financial community would be too great for the economy to distill and handle in a relatively manageable fashion, even if a very painful one, that certainly doesn't mean these 'saved' institutions aren't de facto wards of the state, and that they should be able to take taxpayer money and act independent of any oversight when it comes to compensation of employees or other aspects of their operations that use taxpayer dollars - after all, money is fungible, and without the taxpayer dollars, they would fail, rendering all of their employees jobless.
I do not personally buy the government's argument that the systemic risk is so great that they can't shore up the deposits of these banks and wind them up in an orderly fashion, at a lower total cost than what the government is doing now.
Paint me cynical or ignorant, it makes no difference to me.
I do know that many regional and local banks don't need TARP funds, and maybe the greatest stress test of all is to call the big boys on their threats to return the TARP money if they don't like having to live under an new, imposed set of rules.
They're zombie banks, anyways...kept alive through artificial means.
As for their talented employees, whatever portion of their employee base these people constitute, they should feel liberated and even motivated to get the hell out of those shell banks, and move on to greener pastures. They're going to remain there, while the brass tries to give them the same or more pay, calling it salary rather than a bonus, when their institution is hardly in a position to do much lending anyways, and then bitch about the fact that people are objecting to their pay structure?
Just leave the bank and go somewhere else if jobs are so plentiful elsewhere. What's the big deal?
It's all bullshit. It's a big ruse. The jobs elsewhere aren't plentiful. Anyone who believes that investment bankers face anything other than a dreadful job market is truly naive on a scale I can't imagine.
Either the Congressmen and Senators are giving the Oscar-Award winning performances of their lives, or are completely ignorant of basic economics.
The banks can't lend the money the government has poured into them. That money has to be used to recapitalize their balance sheet, and they can't afford to loan it under even conservative methods, let alone during the worst slump in economic activity since the 40s (anyone who doubts this, look at the acceleration trend in unemployment claims around the globe, manufacturing activity, contraction of GDP in major Western Economies of 10%+ per annum, and just today, an announcement by the Bank of China, formerly warning of hyperinflation, that they can afford to cut central bank interest rates to 'near 0,' as inflation risks have subsided).
As Landis and Makloda have aptly stated, the strongest argument to bailing out megabanks with major counter-party risk like BofA and Citi is that not doing so would take down those institutions who they owe money to, whether Goldman Sachs, JP Morgan or Republic Bank of Toledo.
However, even if one were to conclude that the systemic shock waves to the financial community would be too great for the economy to distill and handle in a relatively manageable fashion, even if a very painful one, that certainly doesn't mean these 'saved' institutions aren't de facto wards of the state, and that they should be able to take taxpayer money and act independent of any oversight when it comes to compensation of employees or other aspects of their operations that use taxpayer dollars - after all, money is fungible, and without the taxpayer dollars, they would fail, rendering all of their employees jobless.
I do not personally buy the government's argument that the systemic risk is so great that they can't shore up the deposits of these banks and wind them up in an orderly fashion, at a lower total cost than what the government is doing now.
Paint me cynical or ignorant, it makes no difference to me.
I do know that many regional and local banks don't need TARP funds, and maybe the greatest stress test of all is to call the big boys on their threats to return the TARP money if they don't like having to live under an new, imposed set of rules.
They're zombie banks, anyways...kept alive through artificial means.
As for their talented employees, whatever portion of their employee base these people constitute, they should feel liberated and even motivated to get the hell out of those shell banks, and move on to greener pastures. They're going to remain there, while the brass tries to give them the same or more pay, calling it salary rather than a bonus, when their institution is hardly in a position to do much lending anyways, and then bitch about the fact that people are objecting to their pay structure?
Just leave the bank and go somewhere else if jobs are so plentiful elsewhere. What's the big deal?
It's all bullshit. It's a big ruse. The jobs elsewhere aren't plentiful. Anyone who believes that investment bankers face anything other than a dreadful job market is truly naive on a scale I can't imagine.