Obama: Why We Don't Want To Put Insolvent Banks Into Receivership

Via Matt Yglesias, President Obama answers a whole bunch of people

[T]here have been some who dont dispute that we need to shore up the banking system, but suggest that we have been too timid in how we go about it. They say that the federal government should have already preemptively stepped in and taken over major financial institutions the way that the FDIC currently intervenes in smaller banks, and that our failure to do so is yet another example of Washington coddling Wall Street. So let me be clear the reason we have not taken this step has nothing to do with any ideological or political judgment weve made about government involvement in banks, and its certainly not because of any concern we have for the management and shareholders whose actions have helped cause this mess.

[MORE . . .]

Rather, it is because we believe that preemptive government takeovers are likely to end up costing taxpayers even more in the end, and because it is more likely to undermine than to create confidence. Governments should practice the same principle as doctors: first do no harm. So rest assured we will do whatever is necessary to get credit flowing again, but we will do so in ways that minimize risks to taxpayers and to the broader economy. To that end, in addition to the program to provide capital to the banks, we have launched a plan that will pair government resources with private investment in order to clear away the old loans and securities the so-called toxic assets that are also preventing our banks from lending money.

(Emphasis mine.) Let me say, imo that is one of the worst answers I have ever heard. It makes me question if Obama even understands what the problem is.

What's your view?

Speaking for me only

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  • I think (5.00 / 1) (#1)
    by Steve M on Tue Apr 14, 2009 at 03:30:52 PM EST
    that without an explanation of "why" it is just a pointless and conclusory remark.  We aren't nationalizing because - wait for it, wait for it - we think nationalization would be an inferior approach.

    I'm not a mind reader, but to me it sounds like the real answer may be "we don't think we have the legal authority to nationalize, but we don't want to admit it just in case we end up trying it anyway."  But that could be just my wishful thinking.  Certainly, if they thought nationalization was a good idea but just not a legal one, they could go to Congress for additional authority.

    Disagree (5.00 / 2) (#2)
    by Big Tent Democrat on Tue Apr 14, 2009 at 03:33:14 PM EST
    He did not say the Geithner Plan was better, he said it would cost less.

    The efficacy issue was not even addressed.

    Indeed, that's my point about not getting the problem - he did not build a plan to work, but, in his view, to cost less. Terrible.


    And he didn't explain why the admins. (5.00 / 1) (#12)
    by oculus on Tue Apr 14, 2009 at 03:53:46 PM EST
    thinks its plan will save the taxpayers money compared to the action his critics support.

    In fact, we already know ... (none / 0) (#18)
    by Robot Porter on Tue Apr 14, 2009 at 03:56:48 PM EST
    the opposite is true.

    It will cost taxpayers trillions.


    No we don't. That is BS. (none / 0) (#25)
    by Green26 on Tue Apr 14, 2009 at 04:05:14 PM EST
    And what (5.00 / 1) (#39)
    by cal1942 on Tue Apr 14, 2009 at 04:20:24 PM EST
    do you call that private/public deal where we put up 80% and hand out non-recourse loans?

    The only real BS we're hearing is from the administration.


    It is called a "plan (5.00 / 2) (#80)
    by KeysDan on Tue Apr 14, 2009 at 05:19:27 PM EST
    to pair resources.."  Glad they are not making shoes, that would be some pair.  

    Well, I trust the experts on that! (none / 0) (#71)
    by lambert on Tue Apr 14, 2009 at 05:10:34 PM EST
    [rimshot, laughter]

    So, Obama is just trying to save money? (5.00 / 1) (#170)
    by Green26 on Tue Apr 14, 2009 at 09:24:20 PM EST
    He's not trying to do the right thing with the financial crisis? He's not pursuing what he thinks is the best plan, only because his current plan costs less?

    I always thought Obama was a pretty good spender.


    Well (none / 0) (#33)
    by Steve M on Tue Apr 14, 2009 at 04:10:42 PM EST
    I'm not sure they are really intended as separate issues.  I mean, I suppose we could take him hyperliterally and assume he's saying "my plan won't work, but at least it will be cheaper!" but I think that would be silly.  He is at least implicitly saying that his plan will work AND be cheaper.

    Let's assume, for the sake of argument, that the Geithner plan will work.  Like you, I have serious doubts (although I could be won over if they'd let the private sector bear some more of the risk), but let's humor that assumption for the moment.  If that plan will work, I think it is clearly superior to large-scale nationalizations because of the complexity and likely duration.  These are not small local banks that the FDIC can take over on Friday and facilitate a sale to new management before business opens on Monday, as I'm sure you'd agree.

    The stumbling block is that it's simply hard to see how the plan will in fact work.  In my mind at least, it's inseparable from the cost issue because my concern is not so much the amount of money being spent; it's that the money seems to be going down a bottomless drain.  Nationalization would have a cost to the taxpayer but at least it would mean a clean break with the past and an end to the blank checks.

    In other words, I think the Geithner plan is not cheaper because he's going to spend a lot of money, and in the end I think they'll be forced to take more drastic action anyway.  Obama hasn't done anything here to explain to me why the plan will actually work and thus put an end to the government expenditures.  That's why I'm disappointed.


    Did he say his plan would work (5.00 / 1) (#35)
    by Big Tent Democrat on Tue Apr 14, 2009 at 04:15:11 PM EST
    and better than the alternatives? I missed that.

    Nope, but he did say ... (5.00 / 1) (#36)
    by Robot Porter on Tue Apr 14, 2009 at 04:17:34 PM EST
    it wasn't political or ideological.

    Why doesn't that calm you, BTD?



    For the same reason (none / 0) (#42)
    by cal1942 on Tue Apr 14, 2009 at 04:22:11 PM EST
    it doesn't calm me.

    You're just not ... (5.00 / 3) (#47)
    by Robot Porter on Tue Apr 14, 2009 at 04:29:22 PM EST


    But Obama's answer is trying ... very trying.


    That was my reaction (5.00 / 4) (#19)
    by andgarden on Tue Apr 14, 2009 at 03:57:03 PM EST
    Show your work Mr. President; your detractors already have.

    I just had a (5.00 / 2) (#30)
    by cal1942 on Tue Apr 14, 2009 at 04:09:11 PM EST
    flashback to a math exam.

    Mine too (5.00 / 2) (#50)
    by ruffian on Tue Apr 14, 2009 at 04:33:51 PM EST
    WHY is your program better for the taxpayers? We understand that you think it is better, or else, presumably, it would not be your plan!

    Very frustrating. And spare me the medical analogy. I don't believe he understands health care any better than he understands finance.

    I did not skip ahead in reading to get BTD's reaction. When I got to it I had to laugh.


    "Show your work" (none / 0) (#72)
    by lambert on Tue Apr 14, 2009 at 05:11:17 PM EST
    I like that. +10000.

    There are two possibilities, neither (5.00 / 5) (#3)
    by Anne on Tue Apr 14, 2009 at 03:36:05 PM EST
    of which are particularly comforting:

    One is that he actually believes what he's saying, that it makes sense to him.  Oh, Lord.

    The other is that he doesn't really understand the issues, and is merely parroting what his advisors have been steadily feeding him, much like someone who has been brainwashed.  Can I invoke the Lord again?

    Sadly, there are a lot of people who will hear this and think it makes perfect sense, that Obama is being a careful steward of the American economy, and will bank on (sorry about the pun) Obama being able to talk his way out of this mess.

    This is exactly what a number (3.50 / 4) (#8)
    by Green26 on Tue Apr 14, 2009 at 03:51:29 PM EST
    of us have been saying all along. It's been said by and/or discernable from what Geithner and others have been saying.

    It's not hard to understand, especially for people who have even basic knowledge about the financial system, banks and what's been going on.

    Some of you just don't want to understand, believe or agree with this. You refuse to listen to what the regulators, Geithner, Summers and now apparentley Obama are saying.

    You tend to want to believe conspiracy theories and some of the BS coming out of some of the talking head-types.

    Prematurely shutting down some of the big banks would be a huge disaster for the US and world economies and the banking system, in my view. It would also be incredibly costly to the US, in my view.

    With a prolonged and deeper recession, prolonged and double-digit unemployment and prolonged and deepening real estate problems, there may come a time to take over or shut down some of the banks. However, that time is certainly not now.


    Well, simple soul that I am, let me (5.00 / 10) (#29)
    by Anne on Tue Apr 14, 2009 at 04:08:12 PM EST
    just say that when there is trouble in the hen-house, I'm not all that sure I can count on a bunch of foxes to tell me how to fix it; in fact, I'm inclined to think that whatever solutions the foxes come up with will be designed to protect their turf and allow them to continue doing what foxes do.

    And yes, I do see Geithner as a fox - the resemblance is a little uncanny, actually; Paulson - fox, Larry Summers - fox.  Goldman Sachs - the foxes' den, for crying out loud.

    Your assumption that any nationalization or receivership would be premature is based on what, exactly?  It's not like they have told any of us enough to be able to comfortably come to that conclusion.  You chide those who are taking a more negative view of how this is all being handled, but seems to me you are sucking up whatever pap they are shoveling your way as fast as it can be dished out - as a matter of faith?  Or what?  

    I fully expect the foxes to continue to exploit Obama's pathological inability to take bold and decisive action - right up to and beyond the point where it will be too late.


    And you are not (4.00 / 3) (#65)
    by Catch 22 on Tue Apr 14, 2009 at 05:01:38 PM EST
    sucking up whatever pap those you listen to are shoveling your way as fast as it can be dished out?

    There are a few here who actually have some experience in banking and securities including myself who have been saying all along that  nationalization would be more costly. But those with tin ears will not listen. Or if they do listen they ignore it because they either have no answer or they know that it would be more expensive is correct.

    If the issue is taxpayer money, and from reading here that is what it appears to be the issue here with most people then the Obama plan is the least expensive. I have to laugh when people like Warren talk about 10 Billion that could be going to other purposes. What does she think that the fix that she does not suggest is going to cost nothing? Don't her and others realize that with nationalization you buy all the bad assets of those banks with your tax dollars? Don't they realize that once that is done then all other assets of the same class become virtually worthless and those must be bought also? How much would that cost? Anyone know? That was an early option talked about. But when Obama put a pencil to it they know it was a non-starter.

    The issue here is total cost. Nationalization buys up all the assets of the nationalized banks and likely makes the same assets held world wide virtually worthless. That not only does not fix the problem, it makes it worse. Yet that is what the nationalization people want!

    And so you talk of foxes in the hen house instead of dollars when it is dollars which are at issue. It's bizarre. I'd really suggest you quit you listening to those who are shoveling it your way as fast as it can. I'd suggest that you stick with the hard facts and problems rather that let yourself b sidetracked by all the useless sideshows that the blogs shovel your way.


    Calm down (5.00 / 1) (#73)
    by Big Tent Democrat on Tue Apr 14, 2009 at 05:11:41 PM EST
    You have a right to your opinion, but can the attitude. We have enough Masters of the Universe already.

    Huh? (none / 0) (#90)
    by Catch 22 on Tue Apr 14, 2009 at 05:35:29 PM EST
    If you've got experience in the banking industry.. (5.00 / 5) (#84)
    by lambert on Tue Apr 14, 2009 at 05:23:35 PM EST
    ... which bankster? Any skin in the game? Out of curiousity.

    Since the experts are the ones who were very well paid to bring this disaster upon us, surely you'll be the first to understand that skepticism is a very natural thing?


    I've never worked (none / 0) (#87)
    by Catch 22 on Tue Apr 14, 2009 at 05:33:26 PM EST
    for a bank.

    You write... (5.00 / 3) (#92)
    by lambert on Tue Apr 14, 2009 at 05:39:40 PM EST
    ... "There are a few here who actually have some experience in banking and securities including myself who"

    So, since you're arguing from authority, that authority being your experience in banking and securities, what's experience? Since you give no links or evidence that would make you otherwise credible.


    Stick to the issues (none / 0) (#97)
    by Catch 22 on Tue Apr 14, 2009 at 05:58:52 PM EST
    and not the personal stuff.

    For a guy who mainly nips at people heels all day long I don't think you should be judging those who talk about the actual issues when you don't. If you don't like what I say or believe what I say - I say no biggie.


    You make an argument from authority... (5.00 / 3) (#108)
    by lambert on Tue Apr 14, 2009 at 06:13:40 PM EST
    when the authority is you.

    Naturally, I ask for the nature of your authority -- your actual experience, and so forth.

    You answer with "personal stuff."

    Alrighty, then. Seems a bit circular, to me.


    A tip (5.00 / 1) (#127)
    by Cream City on Tue Apr 14, 2009 at 06:37:14 PM EST
    beware this sentence construction problem:

    "For a guy who mainly nips at people heels all day long I don't think. . . ."

    That makes you ("I") the subject of the sentence, modified by the preceding prepositional phrase.

    In other words, you are stating that (a) you are a guy who mainly nips at people's heels all day long, and (b) you don't think.


    And oculus calls ME the arbiter! (5.00 / 1) (#154)
    by Steve M on Tue Apr 14, 2009 at 07:45:56 PM EST
    You make an argument from authority... (none / 0) (#109)
    by lambert on Tue Apr 14, 2009 at 06:13:40 PM EST
    when the authority is you.

    Naturally, I ask for the nature of your authority -- your actual experience, and so forth.

    You answer with "personal stuff."

    Alrighty, then. Seems a bit circular, to me.


    22, I have found that (none / 0) (#180)
    by Green26 on Tue Apr 14, 2009 at 09:49:37 PM EST
    posters with no game or substance, sometimes resort to nipping at heals.

    You said (5.00 / 4) (#138)
    by The Addams Family on Tue Apr 14, 2009 at 07:00:28 PM EST
    There are a few here who actually have some experience in banking and securities including myself

    That is a direct quote. So step up. Tell us what your experience is, since you are making said experience the basis of your claim to superior knowledge.


    I'm sorry if you didn't get the (5.00 / 6) (#156)
    by Anne on Tue Apr 14, 2009 at 07:58:50 PM EST
    foxes-in-the-henhouse analogy; I'm equally sorry that you weren't prepared to - or didn't think you needed to - support your representation of having experience in the industry (which must be the securities industry, since you did say you never worked for a bank), but chose to personally attack someone for asking that you do so.

    The issue isn't just taxpayer money; I think most of us understand that sometimes the least expensive alternative is not the best one - "you get what you pay for" is something most people can relate to.  I venture to guess that most people would be willing to bite the bullet on the cost if we had been treated like we were halfway intelligent enough to be trusted with the truth; instead we get the Obama treatment that supposes that he just needs to talk down to us, pat us on the head, and tell us not to worry - that all the really smart people are on the job!

    For some reason, I get the feeling that the reason nationalizing - or placing into receivership - the secret bad banks (shhh - we can't actually say which ones they are) is not going anywhere is that the administration is allowing the banks to telegraph the terms by which such a thing would happen - I do not understand this.

    What I am trying to do is take in information from all sides of this, and listen to my gut, as well, but this has been complicated by the reluctance by the administration to level with us - beyond what are increasingly stale platitudes.

    We all come at this from different perspectives and different places in our lives; I think we all have something to offer to the discussion, and I do not think we should all just be withdrawing from it to extend blind faith and trust to any one position or ideology.


    Well said. (none / 0) (#157)
    by santarita on Tue Apr 14, 2009 at 08:13:17 PM EST
    i like your thought process (none / 0) (#165)
    by Jlvngstn on Tue Apr 14, 2009 at 09:11:16 PM EST
    don't agree with you most of the time but am glad you are here.  I hate echo chambers and appreciate your take.  I think it is a bit talkingpointish on occasion but all in all think you debate mostly on a fair level.  Keep up the posting and stay fair like when you think i am posting idiocy and argue squarely.

    But it's a "confidence" ... (none / 0) (#34)
    by Robot Porter on Tue Apr 14, 2009 at 04:14:09 PM EST

    As long as we believe that the foxes won't kill the chickens, it doesn't matter how many foxes you put in the chicken coop.



    don't foxes have to eat too? (none / 0) (#166)
    by Jlvngstn on Tue Apr 14, 2009 at 09:11:46 PM EST
    Sure, sure. Hens? (none / 0) (#172)
    by Green26 on Tue Apr 14, 2009 at 09:28:47 PM EST
    Geithner has spent most of his time in government and places like the IMF.

    Summers has largely been in academia and government.

    Paulson's a hen. I'm sure he didn't want to do the best thing for the country. He only wanted to preserve Wall St. I wonder why did he let Lehman fail and Bear Stearns almost fail?

    How about Bernacke? A hen? I don't think so.

    Obama, a hen? Are you kidding?


    I don't think you understand the (5.00 / 2) (#177)
    by Anne on Tue Apr 14, 2009 at 09:42:13 PM EST
    whole analogy.  And the more you try to make it something it isn't, the more embarrassing it is for you.

    Just stop.


    O.M.G. (5.00 / 1) (#68)
    by lambert on Tue Apr 14, 2009 at 05:05:33 PM EST
    I guess two Nobel prize winners (Krugman. and Stiglitz) are conspiracy theorists.

    Look, I understand, I really do understand, the need to defend your guy at all costs, but can't you at least come up with talking points that don't insult a child of six? Thanks. Maybe the blast fax hasn't fired off yet? Could that be it?


    Shouldn't have taken long ... (none / 0) (#79)
    by Robot Porter on Tue Apr 14, 2009 at 05:18:32 PM EST
    aren't they using Twitter these days?

    Nobel prizewinners as conspiracy theorists (5.00 / 2) (#115)
    by lambert on Tue Apr 14, 2009 at 06:18:44 PM EST
    Then these guys swan around as experts... I love it.

    Unemployment is huge in Atlanta, GA (none / 0) (#15)
    by kmblue on Tue Apr 14, 2009 at 03:54:55 PM EST
    Foreclosures in Fulton County alone over 500, and yet another factory closed yesterday, putting around 300 out of work.

    I'm ready for action now, not later.


    Are you saying that you would be for (none / 0) (#54)
    by ruffian on Tue Apr 14, 2009 at 04:46:27 PM EST
    taking over some of the big banks if there were a
    prolonged and deeper recession, prolonged and double-digit unemployment and prolonged and deepening real estate problems,

    I think those things are a near certainty. Why is taking over these banks later rather than sooner be a better idea? Why are we spending a trillion dollars now ons omething that will not prevent any of those things?


    Those things are not near certainty. (none / 0) (#56)
    by Green26 on Tue Apr 14, 2009 at 04:49:41 PM EST
    In fact, there are some signs of improvement in all 3 prongs. It's still far too early to tell, though.

    If the "prolonged" things occur, and cause banks to move closer to being unable to save them, then yes I would support taking them over or shutting them down.


    improvement on unemployment? (5.00 / 2) (#59)
    by CST on Tue Apr 14, 2009 at 04:55:12 PM EST
    Where?  Not here.  Not in any numbers I've seen.  In fact, that appears to be getting worse.

    Must be that fleeting glimmer thing . . . . (5.00 / 3) (#64)
    by nycstray on Tue Apr 14, 2009 at 05:01:22 PM EST
    Be realistic (none / 0) (#70)
    by Catch 22 on Tue Apr 14, 2009 at 05:10:33 PM EST
    In all recessions jobs are the last thing to improve for the simple reason that demand precedes jobs. Companies don't start hiring because things might get better. They don't start producing because people might be thinking about buying.

    A little historical context of recession recoveries would keep you from posting silly things like unemployment recovering at this stage.

    Let's also not forget we were in the beginnings of a recession before the banking thing hit the fan. Yes it made it worse but it was not the cause of the recession.


    "Parent" is your friend (none / 0) (#75)
    by CST on Tue Apr 14, 2009 at 05:14:50 PM EST
    I was responding to this claim:

    "In fact, there are some signs of improvement in all 3 prongs."

    unemployment was listed as one of the prongs.

    I wasn't claiming it should be improving, I was responding to the poster who said it already was - the "silly thing".

    A little reading comprehension would prevent you from making irrelevant comments.


    3 prongs (none / 0) (#94)
    by Catch 22 on Tue Apr 14, 2009 at 05:49:29 PM EST
    in regards to the economy can mean different things to different people. I'm not sure the poster you responded to was including employment as he did not list what his three prongs were. it might help if you would have asked him before assuming and then attacking him for something he may not have meant.

    A little reading comprehension would prevent you from making irrelevant comments.


    yes he did (none / 0) (#171)
    by jeffhas on Tue Apr 14, 2009 at 09:24:25 PM EST
    I'm not sure the poster you responded to was including employment as he did not list what his three prongs were

    Yes he did say it... right here:

    by Green26 on Tue Apr 14, 2009 at 03:51:29 PM EST

    With a prolonged and deeper recession, prolonged and double-digit unemployment and prolonged and deepening real estate problems, there may come a time to take over or shut down some of the banks.

    I won't even get into relevance any more - you're clearly the expert.


    Unemployment claims were less (none / 0) (#110)
    by Green26 on Tue Apr 14, 2009 at 06:14:12 PM EST
    than expected last month. Unemployment in some areas is not getting significantly worse.

    u6 (5.00 / 2) (#150)
    by Jlvngstn on Tue Apr 14, 2009 at 07:30:58 PM EST
    is growing which is troubling and we will see an adjustment for march.  I don't expect to see a dramatic drop in April but do expect an increase in May.  

    Your thoughts?

    UE is largely the canary in the coal mine at the start and historically speaking housing has brought us into every recession (save for 2001) and housing has taken us out of it.

    That said, even in 1982 we had a substantially higher mfg base of employees and in the past 30 years the shift to a service based economy has painted us in a corner because our new economy is based on consumption which means service based employment.

    2001 recession was the longest return to peak employment at 46 months, with the closest second being the 90's recession.  Every other recession we had a return to peak employment within 14-18 months.  So with a service based economy and a prolonged return to peak employment combined with an over leveraged country (not just sub-prime and residential loans) employment this time around is a critical component for recovery and not a lagging indicator.  

    So historically speaking a lot has changed in our economy and employment sector and assuming a lag this time around is acceptable is naive at best.


    Some of the data on claims: (none / 0) (#173)
    by Green26 on Tue Apr 14, 2009 at 09:35:59 PM EST
    Title of article:

    "New jobless claims fall more than expected to 654K"

    "The Fed expects the unemployment rate -- now at a quarter-century high of 8.5 percent -- will probably "rise more steeply into early next year before flattening out at a high level over the rest of the year," according to minutes from the central bank's March meeting released Wednesday. Many private economists expect the rate will hit 10 percent by year's end."



    so are you on record (none / 0) (#175)
    by Jlvngstn on Tue Apr 14, 2009 at 09:39:10 PM EST
    to state that 645 is the low for the rolling 4wka?  I think you will be wrong come May. there i am on record.

    No, I am on record for reporting (none / 0) (#182)
    by Green26 on Tue Apr 14, 2009 at 09:53:03 PM EST
    that some of the media said the "jobless claims were less than expected".

    When things are getting bad, and they don't get as bad as most had expected, that's actually a positive sign.


    they said the same about (none / 0) (#185)
    by Jlvngstn on Tue Apr 14, 2009 at 10:00:36 PM EST
    January.  What the media reports as positive without context is useless.  I don't believe everything i read in the media or this site.  I try to make reasonable assumptions on data not reporting.  

    They said housing was in recovery because feb numbers were looking good. Being that 45% were distressed sales and the moratoria imposed by fannie/freddie on foreclosures was only lifted two weeks ago, that number is also useless.

    I am all for good news but reporters giving half baked info are not providing news, they are providing opinions.  If I want opinions I will watch B Oreilly or K olberman and only do so to humor myself.

    You have much opinion, what i would like to see is some speculation.  Over time, it helps me determine whether or not you are well reasoned or better suited for vegas making a donation to the nevada economy.


    Which "prong"? (5.00 / 1) (#69)
    by lambert on Tue Apr 14, 2009 at 05:07:37 PM EST
    The Wells Fargo profit thing? That was accounting manipulation, quelle surprise.

    Or maybe that's a "shoot"  not a "prong"? Confusing!


    Even if you accept the specualtion (none / 0) (#76)
    by Catch 22 on Tue Apr 14, 2009 at 05:15:37 PM EST
    that WF profit was creative accounting it was not all creative accounting. The speculators only surmise 1/3. Leaving 2/3 are real profit.

    But to you the 2/3 real profit is not important it is the 1/3 that may or may not be that is important.

    Typical post for those who hope for the worst.


    Ha ha! (5.00 / 2) (#78)
    by lambert on Tue Apr 14, 2009 at 05:17:59 PM EST
    WF's reporting is only one third fake!

    And that's the optimist's view. Good luck with that.


    Why do I waste my time with silly people? (2.00 / 1) (#101)
    by Catch 22 on Tue Apr 14, 2009 at 06:06:12 PM EST
    If you bothered to read the actual piece you would have seen this:

    It appears that as much as one-third of the bank's [$3 billion] first quarter earnings may be nothing more than the result of an accounting treatment

    Ha ha! yourself. No one ever said you had to be able to read or even think before posting foolishness.


    Since you're not doing that here... (none / 0) (#112)
    by lambert on Tue Apr 14, 2009 at 06:15:58 PM EST
    ... I don't know why you ask.

    You rightly point to the content of the quote, from the link that I provided, which indicates that, indeed, only 1/3 of the WF was due to pure accounting. And so what?

    From the perspective of the whole "green shoots" brigade, which includes yourself, that is, indeed "only 1/3 fake."


    well it is only (none / 0) (#134)
    by Catch 22 on Tue Apr 14, 2009 at 06:48:44 PM EST
    fake when you don't understand accounting which obviously you don't.

    People like you get on here and talk about things they have absolutely no understanding of. They act like accounting adjustments that can reflect both higher losses or higher gains are something recently invented. It's hilarious. Someone like you who never took Accounting 101 is here claiming to know more than the accountants who certify these financial statements do because of a few paragraphs they read on a blog - and what you read is speculation, not even verifiable truth. If you only knew how foolish that is of you.


    Do you REALLY (5.00 / 1) (#144)
    by Big Tent Democrat on Tue Apr 14, 2009 at 07:13:07 PM EST
    think this is a good period for bragging on the accounting industry?

    I am not sure (none / 0) (#152)
    by Steve M on Tue Apr 14, 2009 at 07:38:44 PM EST
    that anyone should be interested in hearing lectures on accounting from a person who thinks that quarterly financial statements are certified by the company's accountants, as opposed to simply published by management.

    Can you point out any accounting (none / 0) (#174)
    by Green26 on Tue Apr 14, 2009 at 09:37:51 PM EST
    industry issues related to the big banks in the last couple years? Just curious. Nothing of note is coming to mind.

    You don't have to be a plumber.... (none / 0) (#148)
    by lambert on Tue Apr 14, 2009 at 07:18:41 PM EST
    ... to know the smell of sh*t.

    Wells Fargo has had no (none / 0) (#77)
    by Green26 on Tue Apr 14, 2009 at 05:17:46 PM EST
    accounting manipulations. That claim is BS and the linked article doesn't support any such thing.

    There should be a requirement of 15 minutes of accounting education prior to posting.


    Here's the quote (5.00 / 1) (#83)
    by lambert on Tue Apr 14, 2009 at 05:21:15 PM EST
    Since you don't give it:

    "Details were scarce [in the preliminary earnings release for Q1] and we believe that much of the positive news in the...results had to do with merger accounting, revised accounting standards and mortgage default moratoriums, rather than underlying trends," wrote [KBW analyst Frederick] Cannon, who downgraded the shares to "underperform" from "market perform." "We expect earnings and capital to be under pressure due to continued economic weakness."

    I didn't say fraud, I said manipulation. The report was treated as "green shoots" and turned out to be no such thing.

    Meanwhile, there should be a requirement that people who call Nobel prize winners conspiracy theorists get any kind of education at all.


    Ha ha! (none / 0) (#106)
    by Catch 22 on Tue Apr 14, 2009 at 06:12:06 PM EST
    the quote says:

    "we believe"

    "We believe"! Not 'We know'. Or not 'we have actually seen the financial statements'. LOL

    Where do you people come from? You take any speculation as the truth as long as it fits your view. Unbelievable.


    Okay, where's the "manipulation"? (none / 0) (#113)
    by Green26 on Tue Apr 14, 2009 at 06:16:29 PM EST
    I take it you don't believe manipulation is fraud.

    Trends Versus One-Time Occurrences... (none / 0) (#141)
    by santarita on Tue Apr 14, 2009 at 07:04:59 PM EST
    If the analyst is correct in saying that the positive results were from
    merger accounting, foreclosure moratoriums and revised accounting standards rather than trends, He is not talking about manipulating the numbers.  He is merely saying that the good results look to be more from one-time occurrences rather than trends.  From his point of view the results may not be as significant as first thought.  But again it is not a question of accounting manipulation.

    Hey, still waiting for your (none / 0) (#176)
    by Green26 on Tue Apr 14, 2009 at 09:40:05 PM EST
    explanation of the difference between accounting manipulation and accounting fraud.

    Just curious to find out what you meant by distinquishing between these two things in the Wells Fargo context.


    How about rather than saying that (5.00 / 1) (#117)
    by inclusiveheart on Tue Apr 14, 2009 at 06:22:29 PM EST
    everything is BS trying out this approach:  Tell people exactly why Wells Fargo's numbers are beyond reproach - if you can.

    Because they (none / 0) (#126)
    by JThomas on Tue Apr 14, 2009 at 06:35:58 PM EST
    are audited and signed off by public accounting firms that have a ton of liability if they approve an accounting treatment that is not covered by generally accepted accounting principles.

    That worked out well for Enron. (5.00 / 1) (#130)
    by inclusiveheart on Tue Apr 14, 2009 at 06:43:54 PM EST
    No reason Wells Fargo shouldn't take advantage of the same right?

    Enron's accountants got sued. (none / 0) (#178)
    by Green26 on Tue Apr 14, 2009 at 09:43:24 PM EST
    I highly doubt that Wells Fargo's accountant will be sued over this. In fact, I suspect that everything Wells Fargo did and reported was perfectly fine and acceptable under GAAP.

    There are a lot of ways to manipulate (5.00 / 1) (#149)
    by lambert on Tue Apr 14, 2009 at 07:23:58 PM EST
    Puffery in the press being one of them.

    Personally, I find it hilarious that the WF profit report, widely heralded as one of the "green shoots" turns out to have 1/3 of the much-touted profitably the result of an accounting result that has nothing to do with real profit.

    (I specifically made no claim of fraud, and specifically made no claim that the accounting wrong.)

    All I claimed was that the WF report was manipulative -- which, given the politicization of the entire bailout process, not to mention the profits to be taken by insiders on a rally, you'd have to be a child of six to believe it was not.


    Also manipulating us by blogclogging (5.00 / 3) (#155)
    by Cream City on Tue Apr 14, 2009 at 07:52:40 PM EST
    Remember that odd story of the Obama campaign hiring 450 or so young'uns to hit their computers to do thousands and thousands of hits on blogs, clogging them and especially diverting discussions to disparage anybody but their candidate?

    I'm beginning to think that Green and Catch got their training that way.


    Got a link to that odd story? (none / 0) (#169)
    by lambert on Tue Apr 14, 2009 at 09:15:33 PM EST
    I'd love to have it on the record. That was my theory, just based on behavior -- you got to recognize the shift changes after awhile -- and Axelrod's day job as a corporate AstroTurfer. But no links. 450, you say?

    And speaking of manipulation and puffery, since Goldman Sachs is doing it, why not WF? I should stop being so picky.


    The same acct firms (none / 0) (#137)
    by waldenpond on Tue Apr 14, 2009 at 06:56:03 PM EST
    that rated the crap CDS triple A?  Generally accepted acct principles are 'generally accepted' and there is room for interpretation. They can attempt to justify whatever revenue they want.  In this environment, the govt will take little action.

    The Accounting Firms Didn't .. (none / 0) (#142)
    by santarita on Tue Apr 14, 2009 at 07:05:52 PM EST
    do the ratings.

    Ratings (none / 0) (#151)
    by waldenpond on Tue Apr 14, 2009 at 07:38:18 PM EST
    I'm sure if I took the time to google I would easily find an acct firm that has a rating firm as a subsidiary, but it's too obvious. I could easily locate individuals that sit on the boards of investments firms and ratings firms at the same time, but that is obvious also.  

    An auditor must have an understanding of the variables of default spreads to determine exposure if they are going to evaluate the firm's income statements and balance sheets.  

    For me, it's a circle...the credit rating of a firm is based on accounting audits, the value of a firm's CDS are based on the perceived strength of the firm, and on and on.  (It's just a personal bias as I have a dual education in Acct and Finance so I don't separate out the two)


    Rating agencies, not accounting firms, (none / 0) (#183)
    by Green26 on Tue Apr 14, 2009 at 09:54:56 PM EST
    rate securities.

    How about you (none / 0) (#135)
    by Catch 22 on Tue Apr 14, 2009 at 06:53:29 PM EST
    Tell people exactly why Wells Fargo's numbers are not.

    You see your speculation is solid in your eyes but you expect hard evidence from others. That doesn't wash. If you want to challenge what someone said then dig up the hard evidence and challenge them. But this questioning as if it gives you any firm standing is ridiculous.


    I expect hard numbers from these (5.00 / 2) (#147)
    by inclusiveheart on Tue Apr 14, 2009 at 07:17:39 PM EST
    public companies.  Realistic numbers.  I suppose that's too much to ask these days.  I know I can't answer your question and the reason I can't answer it is because a publicly held company won't give you or me the kind of detail that would answer it satisfactorily.  We can't see how TARP money is factoring in.  We can't see exactly where these profits are coming from.  This isn't some great conspiracy theory, it is simply a call for transpanrency and clairity about what the revenue streams are AND whether or not they are one-off (like a TARP infusion) or they are sustainable sources of profit.

    I want to understand what the TARP money has done in each instituion, what kind of money it has made, how their business would have done without it and whether or not TALF is working.  None of these institutions are reporting that kind of data most likely because they can't show any benefit - meaning they are still in pretty big trouble.  ANYONE who could show progress as a result of these investments and further show that they are on solid financial ground at this point would be promoting that and doing everything to prove it.

    You suggest that I am irrelevant which is probably quite accurate, but the reality is that the relevant audiences aren't buying up Wells Fargo left right and center either.  There is a reason for that and it has a lot to do with the fact that WF and the others are not able to come up with empirical and unimpeachable data showing that they really are sound on the foundational level.


    Read the MD&A's of the public (none / 0) (#184)
    by Green26 on Tue Apr 14, 2009 at 09:57:48 PM EST
    TARP recipients. If the TARP funds have been material to the company, they will be discussion. Look at the Liquidity discussions, which are usually at the end of MD&A sections, but sometimes are at the beginning for smaller banks.

    Lambert, you have to remember ... (none / 0) (#81)
    by Robot Porter on Tue Apr 14, 2009 at 05:19:40 PM EST
    a lot of people can't get their prongs straight.



    green shoots (none / 0) (#168)
    by Jlvngstn on Tue Apr 14, 2009 at 09:13:09 PM EST
    mold is a green shoot, but we usually scrape it off and still eat the jelly underneath.  

    I don't (5.00 / 5) (#4)
    by Ga6thDem on Tue Apr 14, 2009 at 03:41:15 PM EST
    thing Obama understands that if his program doesn't work that it will cost the taxpayers more.

    And that let me be clear is really irritating.

    Nixonesque. Maybe it's Mr. (none / 0) (#17)
    by oculus on Tue Apr 14, 2009 at 03:56:05 PM EST
    Favreau's writing.

    He really should hire ... (5.00 / 3) (#21)
    by Robot Porter on Tue Apr 14, 2009 at 04:00:37 PM EST
    the other Jon Favreau to write for him.

    At least then his speeches and statements would be INTENTIONALLY funny.


    You don't build confidence (none / 0) (#88)
    by reslez on Tue Apr 14, 2009 at 05:33:56 PM EST
    by frantically pouring money down a hole. You shine a light in the hole first so you know how deep it is. Maybe even find out how it got there and who dug it -- so you can discount their self-serving advice. Bring in the best experts you can find to hash out alternatives. That way everyone understands the problem, the solution, and the majority of the country is on board. Don't just go before cameras saying "Pouring money down a hole is cheaper than all the alternatives." Where are the details? Why all the stonewalling?

    If this is the best they've got -- my God. We're doomed. The stuff coming out about Goldman is just sickening. We are in serious trouble, folks.


    Well... (5.00 / 3) (#5)
    by smott on Tue Apr 14, 2009 at 03:43:27 PM EST
    I've never gotten from Obama the sense that he has, or cares to have, a deep understanding of the issues...

    So to me this is unsurprising and BTD I agree with your notion that he's not got Clue One what the problem is. More than that - he doesn't much care, other than to make statements that seem reassuring...

    Trash compactor. (5.00 / 1) (#6)
    by Addison on Tue Apr 14, 2009 at 03:45:00 PM EST
    Compacted he's saying that the current course of action is, compared to nationalization, a cheaper way to build confidence in banks toward the goal of unfreezing the credit market.

    There isn't any explanation of that conclusion.

    It is, as Steve M says above, a throwaway line that (a) doesn't answer the real question and (b) doesn't give any clue as to what the real answer may be. It's just the same canned answer we've gotten for a while, and it may be a smokescreen for good action or the smoke and mirrors of bad action.

    The question of who is going to buy (or sell) the toxic assets/loans, for how much, and what they're going to do with them once they've bought them should still be clarified. Additionally, if the toxic assets/loans are overvalued when sold, which seems likely, won't there still be beaucoup phantom assets floating around, untethered to reality?

    And this is about confidence in the banking system promoting lending? But hey, I'm a history major.

    That's not even the problem (none / 0) (#28)
    by Big Tent Democrat on Tue Apr 14, 2009 at 04:07:56 PM EST
    It's not a "confidence" problem. It is a solvency problem.

    They're creating a confidence (5.00 / 4) (#37)
    by inclusiveheart on Tue Apr 14, 2009 at 04:17:41 PM EST
    problem themselves with all their vague language and secret squirrel stress tests.  

    The lack of transparency, the stress tests that nobody fails even though they still need cash infusions, he tells us that this is going to get worse before it gets better, but they can't tell us how bad it really is because it would create a confidence problem.  

    His doctor analogy is apropos only he's like the doctor who looks at your film, goes ashen, gasps and then tells you he can't bring himself to tell you whats wrong with you.  Not very empowering and it doesn't build confidence.


    They're creating ... (5.00 / 0) (#40)
    by Robot Porter on Tue Apr 14, 2009 at 04:20:46 PM EST
    a "confidence game."

    "Secret squirrel stress tests" (5.00 / 2) (#131)
    by Cream City on Tue Apr 14, 2009 at 06:45:10 PM EST
    cracks me up.  I'm watching a couple of the squirrelly beasties right now, running around in circles in a manner that clearly suggests that they have brains the size of peas, and small peas at that.

    But yeh, they do like to do the displays of bravado, swishing their big fluffy tails to project a swaggering confidence and chattering with their big teeth at each other.  The resemblance to some of these guys is uncanny.  I'm calling the squirrels that come to window by name now:  "Bernie Madoff," "AIG,"  "Goldman Sachs," etc.  

    Haven't named any of them Timmy or Larry yet, but there's time.  And lots of squirrels out there.


    FWOP (5.00 / 2) (#41)
    by Addison on Tue Apr 14, 2009 at 04:21:32 PM EST
    As noted in the second paragraph this wasn't the real answer to the real question. And who knows if there is a real answer to the real question that is not being included in public remarks. Eventually it will have to be, and eventually it will have to be stated in language that even history majors will understand.

    I was pointing out that even within the terms of discussion in those remarks (confidence = recovery) I'm not sure if the internal logic holds up. Creating confidence by prolonging the situation that created a lack of it?

    It's worth noting that President Obama did briefly mention the solvency problem in his full remarks (in the paragraph before the one you quoted), but mainly to say that the Geithner plan was solving it by creating a level of confidence that wold unfreeze the lending market. So we're back at that.

    The emphasis seems to be avoiding the idea of "panic" above other considerations, without a real acknowledgment that there are still many factors floating around that might create panic besides aggressive government action.

    It's a Financial War on Panic.


    Which is why (5.00 / 1) (#43)
    by Big Tent Democrat on Tue Apr 14, 2009 at 04:23:37 PM EST
    I wrote that it seems as if Obama does not even understand the problem.

    understand that Giethner talks as if the problem is "confidence" and "liquidity" not solvency.

    This is a real problem imo.


    At least we don't have to worry (5.00 / 1) (#45)
    by inclusiveheart on Tue Apr 14, 2009 at 04:26:14 PM EST
    about running out of gas as we drive towards the cliff.

    Leaving the dig against history majors aside (none / 0) (#46)
    by andgarden on Tue Apr 14, 2009 at 04:26:48 PM EST
    I basically agree. As Atrios says, TURN THE MACHINES BACK ON!!!!

    At least the dig wasn't at art majors ;) (none / 0) (#60)
    by nycstray on Tue Apr 14, 2009 at 04:55:37 PM EST
    Well... (5.00 / 1) (#61)
    by Addison on Tue Apr 14, 2009 at 04:57:31 PM EST
    ...I AM a history major, hence the "target" of my dig. I am also an Art History minor, but that was mostly an accident.

    Accident (none / 0) (#67)
    by squeaky on Tue Apr 14, 2009 at 05:04:45 PM EST
    Some of the best art history is the history of accidents.

    Ha. That somewhat accidental (none / 0) (#132)
    by Cream City on Tue Apr 14, 2009 at 06:47:07 PM EST
    line is great, and I may have to share it with the art history prof across the street.  She has said something similar.

    It is a confidence problem (none / 0) (#82)
    by Catch 22 on Tue Apr 14, 2009 at 05:20:09 PM EST
    It is lack of confidence in what some very complicated financial instruments are actually worth. Why ignore that fact?

    Cuz the actual fact is (none / 0) (#85)
    by Big Tent Democrat on Tue Apr 14, 2009 at 05:24:37 PM EST
    those fancy financial instruments just ain't worth what the banks have them on the books at.

    That was not the point (none / 0) (#96)
    by Catch 22 on Tue Apr 14, 2009 at 05:54:46 PM EST
    I was making.

    The point was: "It is lack of confidence in what some very complicated financial instruments are actually worth."

    Thanks for not disagreeing with that.


    Nonsense. (5.00 / 1) (#123)
    by inclusiveheart on Tue Apr 14, 2009 at 06:31:05 PM EST
    People paid for it.

    We know what they paid.  This whole "we don't know what it is worth thing" is a dodge to avoid admitting that they paid a bunch of money for a whole lot of nothing.

    Right now we are in the last throes of panhandling AFTER the gold rush.  Sifting through a river of worthless matter hoping that there will be a nugget of gold that wasn't already extracted.


    Nice to hear (2.00 / 1) (#128)
    by Catch 22 on Tue Apr 14, 2009 at 06:38:37 PM EST
    you are rooting for failure. Of course you base that on no real hands on information.

    Rooting for failure? (5.00 / 4) (#129)
    by inclusiveheart on Tue Apr 14, 2009 at 06:42:15 PM EST
    I'm rooting for reality.  Poor old reality has been having a really freakin' hard time for the better part of a decade now.

    We can all continue to pretend that junk is gold or we can start to focus on gold.  That is the crossroads at which we find ourselves now.  Are we going to pretend that stone soup is nutritious and hope no one calls us on it or are we going to start making some bona fide beef stew?


    Amen... (5.00 / 2) (#140)
    by kdog on Tue Apr 14, 2009 at 07:00:42 PM EST
    debt manufacturing is not in the manufacturing sector.

    No money down is no way to live.

    I vote beef stew...well said inclusiveheart.


    Oh and "no real hands on information" (5.00 / 4) (#139)
    by inclusiveheart on Tue Apr 14, 2009 at 07:00:31 PM EST
    I think just about everyone in this country who owns any kind of financial instrument has some real hands on information about how screwed up this is - and have had distressing notification that their investments were inflated and worth only a fraction of what they were led to believe they were worth.  Those who don't own anything in the market have found out that their real assets are plummeting in value.  And those who own nothing and just have survived have found out that the credit they were encouraged to engage is a deadly trap.  All because some untouchable traders were swapping and leveraging their lives away at a level and in an arena where nothing that any of these people could have done to protect themselves would have shielded them from injury.  The injuries are now only a matter of degree and relative impact.  NONE have escaped injury though.  Everyone has been hit.

    So if the Masters of the Universe say that it is all good, then tell them to make it so because they've left us with nothing.  We can't do this for them.


    Good effing god (5.00 / 4) (#143)
    by The Addams Family on Tue Apr 14, 2009 at 07:06:42 PM EST
    Nice to hear you are rooting for failure.

    Translation: All you meanies criticizing His Supreme Presidency, STFU now.


    Straight (5.00 / 1) (#190)
    by Ga6thDem on Tue Apr 14, 2009 at 10:36:08 PM EST
    out of the Bush playbook is where that comes from.

    Sometimes it's hard to be (none / 0) (#200)
    by The Addams Family on Wed Apr 15, 2009 at 12:24:35 AM EST
    a Democrat,
    Giving all your love to just one man
    You'll have bad times
    And he'll have good times
    Doing things that you don't understand
    But if you love him you'll forgive him
    Even though he's hard to understand
    And if you love him
    Oh be proud of him
    'Cause after all he's just a man
    Stand by your man
    Give him two arms to cling to
    And something warm to come to
    When nights are cold and lonely
    Stand by your man
    And tell the world you love him
    Keep giving all the love you can
    Stand by your man
    Stand by your man
    And show the world you love him
    Keep giving all the love you can
    Stand by your man

    Heh (none / 0) (#105)
    by Big Tent Democrat on Tue Apr 14, 2009 at 06:07:48 PM EST
    Nooo, it is that people know EXACTLY what the sh*tpile is worth.

    That's the problem.


    Really (none / 0) (#118)
    by Catch 22 on Tue Apr 14, 2009 at 06:24:34 PM EST
    Then every major financial publication that is talking about the primary and secondary markets that are going to establish the initial worth of these assets are talking out the as* then. And you know what they don't.

    And of course the line of investors and fund managers who are already lining up for the PPIF Program are just an illusion that is being reported around the world.

    Like you often say - Sheesh.


    Wouldn't be the first time (none / 0) (#119)
    by Big Tent Democrat on Tue Apr 14, 2009 at 06:25:14 PM EST
    But not the case (none / 0) (#124)
    by Catch 22 on Tue Apr 14, 2009 at 06:34:32 PM EST
    this time. There are some serious people lining up. BlackRock Inc (New York Stock Exchange) is looking to invest 20 billion. And they are hoping for 20% returns. Which of course means if they were to resell them and make 20% then the price of the assets goes up 20% more than the initial price. And in the securities market if that happens they will go up another 10 to 15% just on that news. And so on and so on until there real worth is established much to the chagrin of those who don't want them to be worth anything.

    Well, good luck with that n/t (none / 0) (#167)
    by Coral on Tue Apr 14, 2009 at 09:12:11 PM EST
    Don't say "complicated" (none / 0) (#191)
    by lambert on Tue Apr 14, 2009 at 10:40:54 PM EST
    Say "obfuscatory."

    A shell game looks complicated -- but that's only to rope in the rubes.

    In fact, it's quite simple.


    Well (5.00 / 2) (#7)
    by squeaky on Tue Apr 14, 2009 at 03:46:34 PM EST
    At least he got the question right. Unfortunately not the answer.

    Obama's answer is crap (5.00 / 2) (#10)
    by kmblue on Tue Apr 14, 2009 at 03:52:06 PM EST
    And I hate the "some people say" gambit.

    Bush used it all the time.

    I agree with those who say Obama doesn't get it.

    Bush did use (none / 0) (#16)
    by Slado on Tue Apr 14, 2009 at 03:56:01 PM EST
    it but Obama has taken the art of the "straw man" to new and unprecedented heights.

    Well, as long as ... (5.00 / 1) (#13)
    by Robot Porter on Tue Apr 14, 2009 at 03:54:15 PM EST
    it wasn't political or ideological it must be okay then.


    Or to utilize some tired Internet parlance:

    Dumbest.  Answer.  Ever.

    This all steems from the (5.00 / 2) (#14)
    by Slado on Tue Apr 14, 2009 at 03:54:28 PM EST
    inability of the government to admit the actions of past administrations are the same as the actions by this administration.

    The country and gov't are broke.  Obama has 60% approval ratins and should use them to restructure our ecnomy.

    Instead he attempting, quite poorly, to prop up this consumer based economy through more debt, borrowing and spending.

    It won't work and maybe he doesn't even realize why.

    Good lord indeed.

    Fore more on the FED check this out.

    It is not a serious attempt at (5.00 / 1) (#20)
    by inclusiveheart on Tue Apr 14, 2009 at 03:57:57 PM EST
    addressing the issue.

    I haven't seen anything meaningful from Treasury that supports this "cost analysis".

    And because there is really no evidence that this is the "cheaper" option - or even that the cheaper option would yield better results in the long run - it comes off as sounding very political and rather ideological actually.

    Perhaps Obama (5.00 / 2) (#26)
    by jen on Tue Apr 14, 2009 at 04:05:57 PM EST
    is doing exactly what Wall Street paid him to do when they overwhelmingly supported his candidacy.

    I disagree.... (none / 0) (#31)
    by Addison on Tue Apr 14, 2009 at 04:09:43 PM EST
    ...mostly because money wasn't really in short supply for the Obama campaign -- he never had to make a Faustian bargain for cash -- and so the suggestion that he was "paid," either in the obvious bribery way or more subtle and "support" way doesn't make too much sense to me.

    You're serious? (5.00 / 1) (#198)
    by Spamlet on Tue Apr 14, 2009 at 11:46:53 PM EST
    Obama was collecting megabucks from Wall Street as early as 2007. Here's an oldie but goodie, since you seem to have missed it.

    We already "first did no harm" (5.00 / 4) (#32)
    by Cream City on Tue Apr 14, 2009 at 04:09:54 PM EST
    for months now, and it's not working.  ("Glimmers" are not good enough.)  Worse, people are being harmed -- just not the ones who got bonuses.

    It's past time to follow the FDR model:  If something doesn't work, try something else.

    Don't you get it ... (5.00 / 4) (#38)
    by Robot Porter on Tue Apr 14, 2009 at 04:19:55 PM EST
    Obama thinks the patient is fat cats in banking and on Wall Street.

    Not the US economy or (yikes!) the American people!


    How is the largest transfer of wealth... (5.00 / 1) (#192)
    by lambert on Tue Apr 14, 2009 at 10:42:20 PM EST
    ... in American history, with no accountability, no transparency, and not so much as a Congressional hearing,  doing "no harm"?

    I don't know Cream.... (none / 0) (#133)
    by kdog on Tue Apr 14, 2009 at 06:47:09 PM EST
    The cash money giveaway to failed banks and insurers looks like a whole lotta harm to me, and that was what was done in a big rush...we were basically told we had to cough it up right then and there, or it was breadlines and medical experiments for the lot of us.

    When Obama says (5.00 / 2) (#48)
    by cal1942 on Tue Apr 14, 2009 at 04:31:23 PM EST
    "first do no harm," he's saying that the objective is to leave the finance industry intact, no reform welcome.

    I really don't think he gets it at all.  I think he's following his 'experts', Geithner, Summers, et al.  Those people don't want the system changed in any way. They're fighting to keep it intact.

    The lower cost claim without explanation is something of an insult to everyone's intelligence.

    We needed bold and didn't get it.  We are so screwed.

    At this point, I think you just have to (5.00 / 1) (#91)
    by steviez314 on Tue Apr 14, 2009 at 05:35:29 PM EST
    acknowledge that your are 100% for nationaization, there is nothing that would change your mind, and these posts are just like throwing chum into the water for the 95% of your commenters who agree with you, and the 5% (like me) who disagree.

    I can only imagine your opinion if Obama had said he was against nationalization for ideological reasons or becasue he DID want to coddle management.

    Instead he makes a claim that pre-emptive nationalization would cost the taxpayers more. And yet, you think THAT argument is the worst answer he could give!  Yes, this claim is unproven (and UNPROVABLE, until after the fact), but then again all claims that nationalization is the way to go are also UNPROVABLE.  

    Solvency can only be shown by a mathematical analysis of banks' balance sheets and earning power (given certain economic assumptions).  I've yet to see anyone from EITHER side of the argument show their work.

    An assertion is not an argument (5.00 / 2) (#104)
    by Romberry on Tue Apr 14, 2009 at 06:07:40 PM EST
    Arguments are supposed to be backed by facts. (Think "debate") Unbacked assertions are merely assertions. What is the basis? How can you show that what you are asserting is either objectively true, or likely to be true, or more likely to be true than the argument being made by the other side?

    This is all reasoning/logic/debate 101 stuff. If Obama wants to make a case, he has to do something to actually make the case. Merely asserting that it "is" because he said it "is" doesn't cut it.

    I maintain that the meltdown of the banks came as a result of the long term stagnation/collapse of wages coupled with growing debt burdens and the dependence on asset bubbles (which always pop eventually) to create the illusion of shared wealth, all coupled with misguided deregulation and the growth of not well understood derivatives which became (as Warren Buffet predicted) financial weapons of mass destruction.

    When I build a house, I start by constructing a solid foundation. If I build on sand with no foundation, that house will eventually fall down. The modern era of finance, the loss of union power and the failure to share the gains of productivity with workers in order to maintain a broad middle class is the equivalent of a house built on sand.

    Now the house has fallen down. Some of us are saying "Build a foundation!" while others are saying "Let's throw up some walls and a new roof right now. It'll be great! You'll see."

    I don't care how wonderful the roof is. I don't care if you frame the walls with beams of mighty oak. If there is no foundation, it's all coming down. Stop throwing money at a roof that has nothing under it to hold it up. That's what we're doing. And that's why "credit first" is just slap wrong.

    Credit is available for any business or individual that can demonstrate that they deserve it, i.e. that they are credit worthy. If they can't demonstrate that, perhaps they shouldn't be taking out a loan.


    I would have preferred (none / 0) (#93)
    by Big Tent Democrat on Tue Apr 14, 2009 at 05:46:55 PM EST
    he give ANY explained reason for being for anything.

    But let's be honest here, you never provide any real defenses for the Geithner Plan, you must know it is inadequate even if you accept its premise.

    BTW, you were wrong on the AIG/Goldman thing. I am going to be much more skeptical about your comments now.


    I needed about 10 posts to explain how the repo (2.00 / 1) (#95)
    by steviez314 on Tue Apr 14, 2009 at 05:54:05 PM EST
    market worked to you, so please tell me where in Goldman's earnings report and conference call they said anything different about the $13B that I said.

    I have also repeatedly discussed how the Geither Plan/PPIP is designed to work and what its goals are.  On the other hand, the only ecoonmic anaylsis I have ever seen coming from you are:

    a)  Krugman says
    b)  Masters of the Universe
    c)  But so and so has always hated Obama (snark)

    I understand this is a political and law blog, so please understand MY skepticism about your economic comments.


    Suck on this -MoU (5.00 / 2) (#102)
    by Big Tent Democrat on Tue Apr 14, 2009 at 06:06:23 PM EST
    David Trone, a banking analyst from Fox-Pitt Kelton, said he believed that the A.I.G payments were also a factor in Goldman's first-quarter numbers. Referring to Goldman's fixed income, commodities and currencies business, or F.I.C.C., he wrote in a note to investors, "The big 1Q09 beat itself was all FICC likely thanks to an AIG ($1.42-In Line) payout," He added: "The rest of the results were well below expectations across investment banking, equities trading, asset mgmt, and securities services."

    Goldman was one of the largest recipients of government funds used to unwind the contracts that nearly bankrupted A.I.G. in September. A government-backed vehicle bought the distressed securities underlying the contracts at full value, allowing the contracts with firms such as Goldman to be ripped up.

    Goldman received $14 billion for its assets through the A.I.G. program, which was $6 billion more than the assets' market value of $8 billion at the time.

    You were blowing smoke up my a** yesterday and frankly, I won't be reading you in the same way again.


    They didn't (none / 0) (#98)
    by Big Tent Democrat on Tue Apr 14, 2009 at 06:00:14 PM EST
    Actual BANK analysts who cover Goldman said so.

    You say your are a trader and you don't know that?

    It turns out your explanations were pretty irrelevant to the question.

    And that piece from The Street was pure BS.

    I knew there was something that just did not add up.


    Your blog post asked the question: (none / 0) (#107)
    by steviez314 on Tue Apr 14, 2009 at 06:13:35 PM EST
    "How much of that profit comes from AIG counterparty positions?"

    My reponses said that for $10B of the $13B it was all collateral swaps done value-for value.

    The Goldman CFO on today's conference call:

    Viniar told analysts today that any profits related to AIG in the January-to-March quarter "rounded to zero," as most of the transactions were unwound before the end of the year. In an interview, he also said profits in December weren't significant.

    `Rounded to Zero'

    "I would never tell you that we didn't book any profit, I don't even know," he said. "I couldn't tell you with any counterparty that we booked zero, but I could tell you it rounded to zero."

    Whatever else Goldman did in the December lost month had nothing to do with AIG and my 10 posts on the subject.

    But hey, I'm just a trader, or maybe I just "say" I'm one.  Are you a lawyer, or do you just "say" you're one too?


    Viniar is FoS (5.00 / 2) (#111)
    by Big Tent Democrat on Tue Apr 14, 2009 at 06:15:00 PM EST
    Tyler Durden:

    "This is kinda a huge deal... Peter Fisher, managing director of BlackRock (yes, that BlackRock), states in a Bloomberg interview that Goldman's first quarter trading profit is non-recurring in nature, and believes it was mostly due to AIG unwinds... It is a little shocking that BlackRock would have anything bad to say about the phenomenal resurrection of financial companies, and puts the huge "profit" in it's true light. After all PIMROCK are the direct beneficiaries of the perpetuating delusion that all is well with the banking system, so it is odd that a BlackRock professional would dare to go against the grain on this one."


    Naked Capitalism (5.00 / 1) (#114)
    by Big Tent Democrat on Tue Apr 14, 2009 at 06:17:17 PM EST
    I suppose I should take anything said by Goldman in general, and its CFO David Viniar, with a fistful of salt. This is the man who during the October-November meltdown, attributed the poor performance to the fact that they were seeing "25 sigma events, several days in a row."

    That show such manifest ignorance as to be laughable. As Brad DeLong pointed out the day before the Viniar remark, apropos quant defenses of defective models, that saying they had seen a 16 sigma event was ridiculous, since the universe wasn't old enough for one to occur. A 25 sigma event is VASTLY more remote. To say it happened not once, but repeatedly, it tantamount to an admission that the models were rubbish. But Viniar said it with a straight face, apparently unaware of what he was really conveying.

    We see the same pattern at work in today's remarks. Viniar professes to by "mystified" at the interest in the Goldman's dealing with AIG and pretends AIG is a mere "counterparty". Let's see, the CEO of AIG was recently a board member of Goldman and still owns $3 million of Goldman stock. Goldman CEO Lloyd Blankfein was the only Wall Street representative asked to confer with Treasury Secretary Hank Paulson when the AIG crisis broke. AIG paid out al its counterparties in full on their exposures at each downgrade, a move that has since been questioned, and Goldman was far and away the biggest recipient of these payments. Viniar's defense is that the payments netted to zero, which is technically correct but more that an tad misleading (why should Goldman be made whole on a bad business decision? Since when is the taxpayer in the business of propping up Goldman, particularly since the firm paid large bonuses in 2008? Aand unlike AIG, where the bonuses are mere chicken feed, we are talking bonuses in easily in excess of $10 billion.


    The Market Ticker (none / 0) (#116)
    by Big Tent Democrat on Tue Apr 14, 2009 at 06:19:19 PM EST

        When AIG was rescued, Goldman Sachs had $10 billion of exposure to the insurance company that was offset with $7.5 billion of collateral as well as credit-default swaps that would have paid off in the event of an AIG bankruptcy, Viniar said on the March 20 call.

        He also said on the call that Goldman Sachs recorded a gain "over time" on the value of the hedges it bought to guard against a default on AIG, even though the government enabled the insurer to honor its obligations. In today's interview, he said those gains were booked "from 2006 to now" and that any gains booked in the first quarter "would have been very, very small."

    My point from the previous Ticker was this:

        If in fact Goldman (or anyone else) was "hedged" against a possible credit loss from their CDS with AIG and they were able to collect on that hedge (no matter what it was) those payments through AIG need to be clawed back immediately as nobody is entitled to be paid twice for the same risk and reap what amounts to a windfall profit by quite literally engineering a multi-billion dollar transfer of funds from the Taxpayer to the firm!

    Now I know that people speak "imprecisely" and reporters do not always get it right, but I think what was said in that Bloomberg article is:

          Goldman got paid over time for their hedge (e.g. they bought CDS that went into the money, they were short the AIG equity as a hedge, etc.)
          The "current" gain (in the last quarter) was basically zero on that hedge (if they were short the equity, for example, this would be expected, as the price of the stock is basically zero and has been all quarter.)

    Ergo, they got paid previously on the hedge over the previous two years and change and as such the question still stands, and is in fact amplified: IT APPEARS GOLDMAN GOT PAID TWICE FOR THE SAME RISK AND THE SECOND PAYMENT CAME STRAIGHT OUT OF THE TAXPAYER'S HIDE.

    If so, that transfer payment was improper as Goldman had already collected on the bet and thus must be clawed back."


    While that seems more a matter of public policy (none / 0) (#121)
    by steviez314 on Tue Apr 14, 2009 at 06:30:49 PM EST
    than law, I do agree with you.

    If Goldman collected on hedges that AIG wouldn't be able to unwind the repo, and then the gov't funds allowed AIG to unwind the repo as planned, Goldman, there is something wrong with double collection.

    Similarly, one should not be allowed to buy a credit default swap without an economic interest in the underlying security at all.


    Goldman's hedging was a (none / 0) (#186)
    by Green26 on Tue Apr 14, 2009 at 10:10:39 PM EST
    separate contract and transaction, from the AIG contract. Of course, they can also make money on the hedge--just like they might have lost money on the hedge.

    The Goldman CFO, according to what I read, said that none of the payments from AIG (in any period) had any P&L impact for Goldman. P&L means profit and loss.


    BTW (none / 0) (#120)
    by Big Tent Democrat on Tue Apr 14, 2009 at 06:27:04 PM EST
    Goldman's 5 billion dollar private offering at 123 oversubscribed by 3/4 of a billion.

    Goldman;s stock price at the end of the day? 115.

    Good to see it's not just taxpayers that Goldman is scr*wing.


    Well hey (5.00 / 2) (#153)
    by Steve M on Tue Apr 14, 2009 at 07:42:30 PM EST
    if private capital is eager to invest in these institutions, I'm not one to ask any questions.

    Perhaps this indicates that there's an abundance of private capital just itching for a chance to participate in the public-private plan and the government shouldn't be insisting on owning so much of the risk.  Well, a guy can hope.


    It was a public offering, but they definitely did (none / 0) (#125)
    by steviez314 on Tue Apr 14, 2009 at 06:34:39 PM EST
    not do the buyers any favors by waiting for such a big rally in their stock to do it.

    For such smart guys, they didn't price it in the hole enough.  Or they would have been better off by announcing earnings last week and pricing it at $115


    No one is getting screwed. (none / 0) (#187)
    by Green26 on Tue Apr 14, 2009 at 10:16:08 PM EST
    These investors must want to get some Goldman stock, as they think it's headed up. The private offering was priced at a discount from Monday's trading price. The trading price declined today.

    what stock is purchased (5.00 / 1) (#188)
    by Jlvngstn on Tue Apr 14, 2009 at 10:19:45 PM EST
    with the thought that it will go down?  You buy stock for the long hold hopefully at bottom.  I didn't buy bac at 4.32 because I thought it would go down to 2.57, not did I buy it thinking it would stay there forever. what is the point of this post?

    The point was the post that (none / 0) (#193)
    by Green26 on Tue Apr 14, 2009 at 10:43:32 PM EST
    said the private Goldman investors were getting screwed. If they, like you, think the stock they purchased will go up, they are not getting screwed.

    The US has bought alot of stock of banks or their holding compaies.

    Are you saying that you believe the US thinks their purchased stock will go up on value?


    i thought the post said that (none / 0) (#199)
    by Jlvngstn on Wed Apr 15, 2009 at 12:10:07 AM EST
    the investors holding were getting screwed by the sale, and thus your point is meaningless, not those buying in the 5 bn capital raise.  They are two different sets of people unless of course they are already holding gs.

    The U.S. Government (none / 0) (#99)
    by Dadler on Tue Apr 14, 2009 at 06:01:59 PM EST
    Issues the actual money we're talking about.  The U.S. government is the most LOGICAL choice to take over these huge banks temporarily.  As the supposed representative of ALL citizens, as well (no laughter, please) it could conceivably create more confidence than any other instituion or institutions ever could.  We may not operate in a perfect world, but the idea that the government that issues the money might have to temporarily take over large financial institutions that require that money as a human requires blood, and that this takeover is most likely and logically the best option, this idea does not take much imagination to muster.  As any great idea or action ever taken, it merely requires the will to fight politically.  And he is not willing to fight.  

    Nor, I should add... (none / 0) (#100)
    by Dadler on Tue Apr 14, 2009 at 06:02:45 PM EST
    ...does Obama even seem to think he HAS to fight.

    Hmmm (5.00 / 1) (#160)
    by TeresaInSnow2 on Tue Apr 14, 2009 at 08:33:19 PM EST
    Non-ideological? What's non-ideological about thinking that the government staying out of the financial disaster while taxpayers remain victims amounts to "doing no harm".

    Whatever is necessary to get credit flowing again (4.00 / 4) (#49)
    by Romberry on Tue Apr 14, 2009 at 04:33:32 PM EST
    Translation: We will do whatever is necessary to see to it that households which are already overburdened by debt get to take on even more debt.

    Sorry, but Obama doesn't get it. The problems we face didn't arise out of the failure of the banks. The failure of the banks arose out of the problems that we face.

    For decades, save a brief respite during Clinton's term of office, wages have been stagnant or worse. The financial 'Masters of the Universe' in cooperation with government policy and the destruction of regulation, substituted EZ credit and asset bubbles (which together created the illusion of wealth and allowed people to live beyond their means by burying themselves in debt) for shared wealth in the form of rising wages that should have been the result of fairly incredible increases in productivity.

    I don't care how much money you throw at the banks. Until the root cause of the problem (too much debt, too little income) is addressed, nothing will be fixed.

    Obama doesn't get it. He and Geithner and the gang want to go back to economic "growth" based on ever expanding debt. I suggest that Obama surround himself with a different set of advisers because the ones he has are the exact types that Ferdinand Pecora of the Percora Commission was referring to in the preface of his book:

    "That its leaders are eminently fitted to guide our nation, and that they would make a much better job of it than any other body of men, Wall Street does not for a moment doubt. Indeed, if you now hearken to the Oracles of The Street, you will hear now and then that the money-changers have been much maligned. You will be told that a whole group of high-minded men, innocent of social or economic wrongdoing, were expelled from the temple because of the excesses of a few. You will be assured that they had nothing to do with the misfortunes that overtook the country . . . that they were simply scapegoats, sacrificed on the altar of unreasoning public opinion to satisfy the wrath of a howling mob..." - Ferdinand Percora, from his 1939 memoir, Wall Street Under Oath.

    (Sorry if this came off as a rant. Reading Obama's comments makes me feel like ranting.)

    Getting income flowing again (5.00 / 1) (#52)
    by ruffian on Tue Apr 14, 2009 at 04:38:31 PM EST
    is what is needed.

    Maybe one hindrance to that is credit, bt I doubt it is the only one.


    Just FYI (none / 0) (#53)
    by gyrfalcon on Tue Apr 14, 2009 at 04:42:07 PM EST
    I rather expect he's talking about commercial credit, not consumer credit.

    And he is talkng through his hat (5.00 / 1) (#57)
    by Big Tent Democrat on Tue Apr 14, 2009 at 04:50:02 PM EST
    It's not lack of confidence that has frozen up the credit markets, it is lack of dollars.

    When banks are insolvent, they do not loan money. Shocking I know.


    Nope, it's not insolvency (none / 0) (#63)
    by Green26 on Tue Apr 14, 2009 at 04:59:35 PM EST
    that is causing banks to cautious about lending. Banks are concerned about things like the economy and real estate values--as well as keeping some of their "capital" powder dry.

    If a bunch of main street business retailers came to you for expansion loans, would you lend to them?

    If a bunch of real estate developers came to you to get loans for real estate development, including new houses, would you lend to them?

    How about companies wanting to do oil and gas development, with oil under $50 per barrel?

    How about commercial real estate development in New York?

    How about companies in the newspaper business?

    How about companies in the hotel business?

    How about airplane manufactuers?

    How about the travel business in general?

    How about car parts suppliers?

    Banks are being cautious, and with good reason--in addition to keeping some of their powder dry.


    Oh, BTD, stop making ... (none / 0) (#66)
    by Robot Porter on Tue Apr 14, 2009 at 05:03:34 PM EST
    everything so clear and easy to understand.

    Don't you know that when talking about financial matters you're supposed to load your statements with jargon and meaningless buzz words?


    I believe he is talking about both. (5.00 / 1) (#62)
    by inclusiveheart on Tue Apr 14, 2009 at 04:57:52 PM EST
    He definitely made references to getting banks to give loans for cars and mortgages.

    He has made numerous references to the banks being the funnel through which government aid with "help many people".

    Problem is that most Americans are losing ground on the wage front and buying a $20-40,000 car is more and more out of reach for them.  I don't know what percentage of the car market is priced closer to $10,000, but I think it is surprisingly low.  

    In any case, we have an inflated market that relies more and more on zero-down credit purchasing because we don't have real wages to create the wealth that we'd need to engage in the consumer economy.  And most people are over leveraged now.  What's frustrating is that Obama doesn't seem to understand that fact and that he doesn't understand that there is a point at which this credit-based economy simply maxes out and collapses in on itself.  We're here!  Rather than trying to get blood from this stone, they should be thinking seriously not just about jobs, but jobs that pay a wage that can support this consumer economy.  That means shifting priority away from the banks and towards the people.


    Odd coincidence that my mail today (none / 0) (#89)
    by oculus on Tue Apr 14, 2009 at 05:35:18 PM EST
    includes a letter from my credit union, which noticed I haven't actually used my equity line of credit and encourages me to do so post haste.  Get thee behind me, Satan.

    Yes I'm sure he is (none / 0) (#55)
    by ruffian on Tue Apr 14, 2009 at 04:48:55 PM EST
    I know he is saying that getting commercial credit going will create lots of jobs. I'm just not sure that is the only problem.

    I think they want to get consumer (none / 0) (#58)
    by Green26 on Tue Apr 14, 2009 at 04:51:05 PM EST
    credit going again too.

    I saw no mention of "insolvent" banks. (2.00 / 1) (#11)
    by Green26 on Tue Apr 14, 2009 at 03:53:18 PM EST
    Just another misleading headline.

    If you read the full remarks... (5.00 / 2) (#23)
    by Addison on Tue Apr 14, 2009 at 04:01:19 PM EST
    ...you'll see that the paragraph BTD blockquoted was headed with the opener, "On the other hand." Which begs the question, what was the "original hand?" Well, in the previous paragraph the President had stated,

    Of course, there are some who argue that the government should stand back and simply let these banks fail - especially since in many cases it was their bad decisions that helped create the crisis in the first place.

    So that portion of his remarks was aimed at insolvent or failing banks.

    I'll also note that his full remarks contained another discussion of health care reform as entitlement reform, which was interesting.


    Meet the golden mean fallacy. (none / 0) (#24)
    by andgarden on Tue Apr 14, 2009 at 04:03:17 PM EST
    You asked so here's my view (1.00 / 1) (#201)
    by BobTinKY on Wed Apr 15, 2009 at 10:02:51 AM EST
    I am not happy with the answer, but I love the question.

    Obama acknowledged in the question he posed to himself every concern about the Geithner Plan that myself and others have expressed here and elsewhere.  He gets the concerns and remains open to future course correction up to and including government adminstered receivership.

    Is his answer horrible?  No, just wrong in my view.  If it is true the Geithner Plan is the less costly approach, the assumption is that the Giethner Plan will work.  If the plan fails, as I believe it will, and that failure requires receivership, then Obama's approach will be far more expensive, financially and politically,. than jumping directly to the receivership option now.  

    Nevertheless, concerns I have had that Obama and our politics in general are too captive of Wall Street to act otherwise have been, to an incomplete yet not insignificant extent, addressed by the President himself.  

    I did not like CLinton's 1993 budget, believing it too compromised and incapable of solving the problems of the day.  But it worked over time.  I am 100% for stuff that works and know from experience approaches other then my own .   I hope I am similarly wrong about the Geithner PLan.  I will continue to voice my concerns in the hope the Plan is modified if not abandoned, but I am far less concerned today that Obama is a political captive of Wall Street than I was yesterday.  

    Right or worng, Obama acknowledged all of my concerns, repeating back nearly each and every criticism and explained why he disagrees.  No matter his explanation fell short of convincing me of the soundness of his approach, his awareness of the issues and acknowledgement of the potential for future course corrections is refreshing.  Others with whom I have disagreed have in the past succeeded despite my misgivings, and I hope that is the case this time.

    W would simply have ignored opposition or knocked down irrelevant strawman arguments of his own making.  

    His Remarks Were... (none / 0) (#9)
    by santarita on Tue Apr 14, 2009 at 03:51:46 PM EST
    conclusory.  But what else can one do in one 45 minute talk?  Bring out detailed asset-liabilities charts that show each of the major financial institutions solvency position?

    I like the term he used: "preemptive nationalization".  That suggests to me that he and his administration believe that the facts don't exist today that would merit nationalization.  It's an interesting comparison, I think, to the Bush doctrine of pre-emptive war that got us into Iraq.  And the least drastic alternative approach is what I have been assuming they have been doing all along.  

    Whether or not it's the most cost effective and efficient approach - I dunno.  Or maybe all I can say is that I have no or insufficient  facts on which to base my answer.

    Treasury should have layed the (5.00 / 1) (#22)
    by inclusiveheart on Tue Apr 14, 2009 at 04:00:49 PM EST
    groundwork for such a statement by providing deatiled charts and data supporting this theory that it is cheaper - and maybe showing why it would be better too - prior to this speech.

    The Internet administration? (5.00 / 1) (#44)
    by oculus on Tue Apr 14, 2009 at 04:24:13 PM EST
    Warren asked Treasury to explain... (5.00 / 2) (#74)
    by lambert on Tue Apr 14, 2009 at 05:12:34 PM EST
    ... their strategy. They didn't respond. It should have been easy to respond. So, either they can't tell us, or, worse, they won't.

    Correction: (none / 0) (#122)
    by santarita on Tue Apr 14, 2009 at 06:30:51 PM EST
    Treasury has not yet responded to the satisfaction of Warren.

    Here's the quote (none / 0) (#145)
    by lambert on Tue Apr 14, 2009 at 07:15:54 PM EST
    From COP report:

    This is the fifth TARP oversight report of the Congressional Oversight Panel.  In our first and second reports, we asked the question, "What is Treasury's strategy?"  In the absence of a clear answer to that question, in our third report, we looked at whether Treasury's programs produced a clear value for the taxpayer by valuing the preferred stock that Treasury had
    purchased using TARP funds.

    And from the second report:

    (4) Strategy. The Panel's initial concerns about the TARP have only grown, exacerbated by the shifting explanations of its purposes and the tools used by Treasury. It is not enough to say that the goal is the stabilization of the financial markets and the broader economy. That goal is widely accepted. The question is how the infusion of billions of dollars to an insurance conglomerate or a credit card company advances both the goal of financial stability and the well-being of taxpayers, including homeowners threatened by foreclosure, people losing their jobs, and families unable to pay their credit cards. It would be constructive for Treasury to clearly identify the types of institutions it believes fall under the purview of EESA and which do not and the appropriate uses of TARP funds. The need for Treasury to address these fundamental issues of strategy has only intensified since our last report.

    I would say Warren has every reason not to be satisfied. Especially if  the answers Obama gave today come from Treasury briefings.


    Warren Was ... (none / 0) (#158)
    by santarita on Tue Apr 14, 2009 at 08:28:27 PM EST
    basically ignored by Henry Paulson when she asked questions.  Each report needs to be read in sequence.  Since January, Treasury under Geithner has been more forthcoming.  So progress has been made in the benchmarks but more needs to be done.  In her most recent report, she recognizes that time pressures may be playing a part in Treasury's inadequate responses.  i would be more concerned if Geithner had adopted the attitude of Paulson towards the Congressional Oversight Panel.

    Feh (5.00 / 1) (#194)
    by lambert on Tue Apr 14, 2009 at 10:51:39 PM EST
    No transparency, no accountability, and that's down to time pressure? That's my four trillion dollars they're throwing into an enormous hole, and they can put some intern on it and get the FAQ written, for pity's sake. I thought Democrats were the party that wanted government to work?

    In A Sense It is Hard to ... (none / 0) (#136)
    by santarita on Tue Apr 14, 2009 at 06:53:45 PM EST
    know with certainty which course of action is cheaper because they are both based on assumptions that may or may not prove true.  

    Why transparency and accountability are needed! (5.00 / 2) (#146)
    by lambert on Tue Apr 14, 2009 at 07:17:34 PM EST
    Better to test the assumptions across as broad a spectrum as possible -- especially since the people who will ultimately pay for the program are the ones being kept in the dark.

    Agreed. n/t (none / 0) (#159)
    by santarita on Tue Apr 14, 2009 at 08:29:07 PM EST
    He's had months to do that (5.00 / 1) (#51)
    by ruffian on Tue Apr 14, 2009 at 04:35:44 PM EST
    And if he is attempting to answer critics in the speech, then answer them with more than 'They're wrong and I'm right.'

    Someone needs to (none / 0) (#27)
    by Big Tent Democrat on Tue Apr 14, 2009 at 04:07:18 PM EST
    Doctors treat living bodies (none / 0) (#86)
    by Dadler on Tue Apr 14, 2009 at 05:33:19 PM EST
    Money is an inanimate object.  What the phuck is he talking about?

    First do no harm?  You're supposed to be TREATING the harm already done, doc!!

    It's almost like a perverse anti-affirmative action talking point: yes, we must fix the problem, but we can't do so by actually fixing it.

    I need a pitcher of fuzzy navels and whole lotta love right now.  Heaven, or hell, help us.

    I love the... (none / 0) (#103)
    by kdog on Tue Apr 14, 2009 at 06:06:52 PM EST
    "like a doctor first do no harm" bit...if only he really meant it, that's a sound way to govern!

    Seems reasonable to me. (none / 0) (#161)
    by LarryInNYC on Tue Apr 14, 2009 at 08:44:02 PM EST
    Obviously there's a difference of opinion on the shortest and cheapest path out of the morass we're in.  There may even be a difference of opinion on what's more important -- getting out of the mess quickly and cheaply, or accomplishing a more fundamental restructuring of the financial system at the expense of a little more short-term suffering.

    That said, and assuming that the stated goal is to return to a solvent, functioning financial system as quickly and cheaply as possible, I don't see anything glaringly, provably wrong in what Obama is quoted as saying or what his Administration's been doing.  So far the crisis seems to be moderating more quickly than I had imagined possible.

    I don't know enough about the financial situation to have an opinion on what policies are best.  I'm suspicious of anyone who thinks the solution to such a unique situation is obvious.  And since we can't compare the outcomes from controlled implementations of different policies even retrospectively we're not going to know whether it would have been better or worse if we'd followed the other path.

    Seems reasonable? (none / 0) (#162)
    by andgarden on Tue Apr 14, 2009 at 08:47:01 PM EST
    Ok, you tell me, what's the reasoning? I just see assertion.

    Yes, it's an assertion. (none / 0) (#164)
    by LarryInNYC on Tue Apr 14, 2009 at 09:03:21 PM EST
    Since I don't think anyone really knows exactly what it will take to bring the financial system back to stability, all we're really doing is comparing one set of assertions against another.

    On one side, we have the assertion that shoring up the existing large banks with public funds will stabilize (or at least has a real chance of stabilizing) the financial system and would be cheaper and otherwise less harmful to the public good than any other path.  On the other side we have the assertion that the funds being supplied are not sufficient, that the cost will be higher, and / or that remaking the financial system should be a higher priority than stabilizing it.

    Since I can't really have an opinion on which side is right, all I really have to judge the two sets of assumptions on is the backgrounds and motives (as imagined by me) of the people making the assumptions.

    In this case I think that both sides -- call them Obama and Krugman -- are sincere in their beliefs.  I don't think either side is acting out of venality.  I think each side is supported by intelligent people and I rather suspect each side could make an argument that, presented without opposition, would convince me.

    The only thing I can say for sure is that prior to February I imagined that by this time the situation would be much worse than it actually appears to be.  Whether that's because I was overly pessimistic, or because the Obama Administration has been doing a better job than I expected, or because the other shoe hasn't dropped yet, I can't say.


    I think you give the Obama argument too much (none / 0) (#181)
    by andgarden on Tue Apr 14, 2009 at 09:52:34 PM EST
    credit. It is not even close to being as carefully explained as the nationalization argument. And as discussed above, it's actually incoherent.

    Even if I were to accept that it's sincere and in good faith, and can't grant that it makes any sense. You expectation that things would be worse now is neither here nor there IMO.


    That's a cop out (none / 0) (#163)
    by Big Tent Democrat on Tue Apr 14, 2009 at 08:56:07 PM EST
    Might as well say we do not know what would have happened if we did not take out Saddam.

    Better to just say you have no opinion and leave it at that.

    That's what I say about health care and energy policy.


    Govt Planning to Reveal Data on Health of Top Bank (none / 0) (#179)
    by Politalkix on Tue Apr 14, 2009 at 09:44:11 PM EST
    Here is the [link]

    Note the qualifications (none / 0) (#195)
    by lambert on Tue Apr 14, 2009 at 10:53:39 PM EST
    The administration has decided to reveal some sensitive details of the stress tests now being completed after concluding that keeping many of the findings secret could send investors fleeing from financial institutions rumored to be weakest.


    What is unusual? (none / 0) (#196)
    by Politalkix on Tue Apr 14, 2009 at 11:12:32 PM EST
    "In ordinary times, regulators do not reveal the results of bank exams or disclose the names of troubled banks for fear of instigating bank runs or market stampedes out of a stock. But as top officials at the Treasury and the Federal Reserve Bank focused on the intensity with which the markets would look for signals about the nation's biggest banks at the conclusion of the stress tests, the administration reconsidered its earlier decision to say little.

    "The purpose of this program is to prevent panics, not cause them," said one senior official involved in the stress tests who declined to speak on the record because the extent of the disclosures were still being debated. "And it's becoming clearer that we and the banks are going to have to explain clearly where each bank falls in the spectrum.""


    Should Be Interesting... (none / 0) (#197)
    by santarita on Tue Apr 14, 2009 at 11:13:47 PM EST
    I'm already anticipating the responses if the reports don't show catastrophic insolvency:

      Accounting fraud
      Manipulation of the data by friends of Goldman Sachs
      Not Enough Information
      Why Wasn't This Done 3 Months Ago
      Poorly designed testing
      Bad Assumptions
      The fix was always in
       Nationalize them now while there is still something left

    One or two of the above may actually have some merit.


    I am grateful (none / 0) (#202)
    by KoolJeffrey on Wed Apr 15, 2009 at 07:02:49 PM EST
    That so many people disagree with the Geithner plan. Under Bush, such arguments would have been branded as treason during a time of war. It's refreshing to see the adults discussing policy for a change.

    Meanwhile, the teabaggin' continues...!