The Importance Of The Financial System (As Opposed To Banks)

By Big Tent Democrat, Section Economy
Posted on Fri May 15, 2009 at 07:42:52 AM EST
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Ian Welsh writes:

The refusal to make [banks] take their losses; the refusal to wind up any of the big banks; the refusal to recognize that what is important isn’t the banking system but what the banking system does, and thus the unwillingness to cut past the big banks and lend directly means that those trillions of dollars of losses are going to have to be paid back by consumers and taxpayers. You will pay. You will pay not just in high interest rates, but in lower wages, and for many of you, a lack of jobs. The economy will not, before the next recession after this downturn, return to the same level of employment the US had before this crisis. All of this because neither party, and neither President, had what it took to stand up to the banks.

(Emphasis supplied.) This very well could end up being President Obama's lasting legacy - his horrendous policy regarding the financial crisis.

Speaking for me only

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The Importance Of The Financial System (As Opposed To Banks) | 52 comments (52 topical)

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context (5.00 / 1) (#4)
by Jlvngstn on Fri May 15, 2009 at 08:51:08 AM EST

AIG Bailout money received = 144 bn
AIG total employees = 116,000
Total cost per employed professionals = $1,241,379.31

ARRA Unemployment investment - 45bn
Total Unemployed = 13.7million
Total per unemployed professional = $3,284.67

So what's your point? (none / 0) (#36)
by lambert on Fri May 15, 2009 at 01:13:00 PM EST

[rimshot. laughter]


: Apply to Aig (none / 0) (#40)
by Jlvngstn on Fri May 15, 2009 at 01:49:09 PM EST

lol

Well, this and (5.00 / 1) (#6)
by DancingOpossum on Fri May 15, 2009 at 08:58:39 AM EST

...covering up Bushco's (and no doubt Democrats') war crimes and continuing our policies of torturing, invading, and bombing civilians. Yay for change!

What I don't understand..... (5.00 / 1) (#42)
by NYShooter on Fri May 15, 2009 at 02:13:19 PM EST

The overwhelming majority of Americans believe (rightfully so) that money is the root of all evil. All politicians are crooks; all politicians are bought and paid for, and all politicians' loyalties are to their big campaign contributors, not the voters.

So why isn't campaign finance reform THE big issue being discussed?

When ten "democratic" Senators are led by lobbyists' leashes to their voting buttons, and willingly, submissively, and obediently surrender their dignity & self-respect in voting "no" to granting bankruptcy judges "cram down" authority in certain cases, the Fat Lady has sung, and Jefferson's America has died.

Public financing for Congress (none / 0) (#48)
by Cards In 4 on Fri May 15, 2009 at 05:18:18 PM EST

is even less popular than financing the presidential campaigns (which may be dead after what Obama did).

People have a chance every year on their tax return to vote for CFR and it gets less popular every year. Try that with Congress where no Democrat wants to finance Tom Coburn's campaign and no Republican wants to finance Dick Durbin's.

Say what you want about lobbyists but petitioning Congress is constitutionally protected. If people won't stop electing Ted Stevens or John Murtha then its a great reason for term limits.


: Thanks (none / 0) (#49)
by NYShooter on Fri May 15, 2009 at 05:57:44 PM EST

I understand all that. But, here's the way I see it:
First, the public is clueless as to what the "check-off" is all about. They see it, and say, "I wouldn't give a nickel to those no-good sons of bitc......" I mean, it's all about salesmanship, isn't it? If the question was framed, "Do you want to donate a dollar into a blind pool which will be distributed evenly to the main candidates so they don't have to sell themselves (and your interests) to deep pocket lobbyists in order to get elected;" or something like that, the results might be different.
Second, while petitioning Congress is constitutionally protected, bribery certainly isn't. Again, it's all about salesmanship.
Third, I think term limits is a taking away of our rights, and while generally popular, specifically it's not. (95% incumbency)
Basically, it's all in how it's sold to the citizenry. The Inheritance tax was popular; rename it the "Death Tax," and It plummets.
Finally, I realize politicians on both sides of the aisle are steeped in cynicism, and both eagerly slop away at the blackmail/bribery trough. But, it's the Right that realizes the vital function it serves for their agenda. And that's why they are far more focused, and aggressive regarding Supreme Court nominees. The decisions they make last forever. (example: Corporations are people.) While majorities come and go, if they can get the "right" Supreme Court judges, their status in Congress doesn't matter that much.
I know it's asking a lot (educating the American public) but until we solve this problem, everything else we're arguing about is just so much window dressing, peripheral noise.

This doesn't get to be about (none / 0) (#1)
by Militarytracy on Fri May 15, 2009 at 07:58:23 AM EST

our "pet issues". This crisis that you see, that I see, that Warren, Krugman, and Stiglitz sees, it is "our" crisis. This isn't Mainstream America's crisis. It is similar to seeing dead people except we see crisis. I hope big Pharma comes up with something to help me deal with my "visions".

: Didn't I read in another post that you were (5.00 / 1) (#2)
by easilydistracted on Fri May 15, 2009 at 08:11:11 AM EST

planning on trying that high-potency pot? Stick with that plan and don't rely on big pharma. Probably couldn't afford it anyway and it won't be on the insurance formulary until it makes WalMart's five buck list.

It's looking like Obama's legacy... (none / 0) (#3)
by kdog on Fri May 15, 2009 at 08:15:55 AM EST

allright, at least so far...the Masters of the Universe President.

Maybe we shoulda called him McSame....cuz this hustle has a very familar smell.

Many did (5.00 / 1) (#5)
by Inspector Gadget on Fri May 15, 2009 at 08:57:20 AM EST

Maybe we shoulda called him McSame

Well (5.00 / 4) (#8)
by Ga6thDem on Fri May 15, 2009 at 09:13:38 AM EST

those of us who did were laughed at. It was all there for everyone to see with his entire economic team being from the University of Chicago Milton Friedman School of supply side voodoo economics. I tell the Goppers that I dont know why they aren't happy with Obama. He's continuing Bush's economic polcies.


: Or (5.00 / 1) (#11)
by jbindc on Fri May 15, 2009 at 09:50:19 AM EST

those of us who did were laughed at
\
Banned.

: Actually, they aren't (5.00 / 0) (#37)
by lambert on Fri May 15, 2009 at 01:15:08 PM EST

University of Chicago is not ALWAYS the Chicago School.
Still, Goolsbee and Sunstein have always been pretty disturbing, even if they aren't ideologically Friedman-ites

: Don't blame me.... (none / 0) (#9)
by kdog on Fri May 15, 2009 at 09:45:26 AM EST

I voted for the one guy who wouldn't cater to bankers, who would have bucked the economic policies of Obama, Bush, Clinton, Bush, and Reagan...I might have been the only one:)

: I've been poking at Orange today (none / 0) (#13)
by Militarytracy on Fri May 15, 2009 at 10:24:23 AM EST

Now I'm leaving my computer because it is what I need to do for me. No more up at 2:00 a.m. pie fighting :) I suppose I won't be happy until I'm banned too :) I can only handle witnessing so much stupid though all at once.

I'd rather call him the Wuss in the WH (none / 0) (#47)
by rennies on Fri May 15, 2009 at 04:49:57 PM EST

Banks are still not in the biz of lending (none / 0) (#7)
by DFLer on Fri May 15, 2009 at 09:03:50 AM EST

Businesses struggle as bank loans remain elusive

from McClatchy

Nope, their in the business of (5.00 / 2) (#10)
by Militarytracy on Fri May 15, 2009 at 09:48:48 AM EST

giant late fees and increased interest rates during a huge unemployment crisis. We all need to catch up! Of course when you file for bankruptcy you don't have to cry about giving them your 401k now :)


God I just read this (none / 0) (#14)
by Militarytracy on Fri May 15, 2009 at 10:26:00 AM EST

and my pronoun use is really starting to s*ck worse than it ever did before.


Their, their, MT, don't fret. (5.00 / 2) (#20)
by DFLer on Fri May 15, 2009 at 11:35:36 AM EST

They're will be another day to worry about pronouns and there proper spellings.


think yer pretty funny huh? (none / 0) (#44)
by Militarytracy on Fri May 15, 2009 at 04:14:37 PM EST

see what happens when you are out front and unafraid? now i'm mostly cheap entertainment.


: amen to that sister! (none / 0) (#46)
by DFLer on Fri May 15, 2009 at 04:19:57 PM EST

didn't you mean to say cheep entertainment?
Homophone, phone home!
Punster, please!

Man, maybe I should try (none / 0) (#33)
by easilydistracted on Fri May 15, 2009 at 12:39:12 PM EST

some of that extra-potent pot. It sure seems your enjoying it a bit two much.


: iI haven't even tried it yet (none / 0) (#45)
by Militarytracy on Fri May 15, 2009 at 04:15:08 PM EST

Ian Welsh (none / 0) (#12)
by ChiTownMike on Fri May 15, 2009 at 09:55:56 AM EST

Another Bozo!

the refusal to recognize that what is important isn't the banking system but what the banking system does

Yeah! The refusal to recognize that what is important isn't Labron James but what the Labron James does! LOL.

Like we could have what the banking system does without a banking system? Sheesh!

the refusal to wind up any of the big banks

Of course he doesn't say which banks and why. Of course he has no hard numbers to make his case. And of course he does not say what "winding" them up would COST!

lend directly means that those trillions of dollars

Really! And the Fed is going to open up branch offices all over the US to accomplish that? WTF!

..that those trillions of dollars of losses are going to have to be paid back by consumers and taxpayers.

Here again we have another genius who refuses to recognize that those trillions are actually either loans that some banks want to pay back now - when the government says they can - or are secured with equity positions held in stock. But yet this Bozo Ian Welsh whats to make it sound like it's free money on the backs of the taxpayer. Where is the credibility with this guy?

All of this because neither party, and neither President, had what it took to stand up to the banks.

What is standing up to the banks mean? Closing their doors? Not lending them money to survive? Just what does that more than EMPTY statement mean?

This Ian Welsh does nothing but write Bozo talking points with little to back up his rhetoric.

Make the banks into regulated public utilties (5.00 / 0) (#38)
by lambert on Fri May 15, 2009 at 01:16:50 PM EST

Then the geniuses can go off and gamble with their own money, instead of pissing away ours.


Public Utilities huh? (none / 0) (#43)
by ChiTownMike on Fri May 15, 2009 at 02:56:45 PM EST

Name one public utility that even comes close to what banks do?

I find it pretty amazing that you want the government to set your interest rates at retail, and not only know exactly what credit cards you have and what you owe on them, but to issue them to you too! Plus you want them to be stock brokers - so much for the SEC. And want to give them all your credit information so they will lend you money?!!! So much for the Fair Credit Reporting Act when you want to open the barn door to the government. I find your proposal outrageous.


It's all about access to power, right? (none / 0) (#50)
by lambert on Fri May 15, 2009 at 06:37:05 PM EST

Why is access to electrical power different in any way from access to financial power?

I'm envisaging this for financial services ordinary people need -- like mortgages, auto loans, home improvement loans, maybe student loans (where Obama is creating a single payer model, interestingly enough). The idea is to make banking boring again, as Paul Krugman says.

Our financial class is a collection of gangsters and thieves who have been rewarded for their looting with trillions of dollars from the public purse, first by Bush, and then by the Finance Wing of the Democratic Party. The financial crisis is an atrocity that must never happen again.

So, low risk, low interest, low rate of return. Like a public utility.

Sure, there's a market where the gamblers can gamble. Let them do it there, and not take the real economy down with them.

Thanks for the reaction, though. Shows I've hit a nerve.


The nerve you hit is absurdity. (none / 0) (#51)
by ChiTownMike on Fri May 15, 2009 at 06:44:14 PM EST

It is absurd to even think about something that will never happen. Why not think of real solutions rather than pie in the sky flights of fantasy? You don't even think of the cost of such nonsense. Unbelievable. I'm out dude. Go take some more hallucinogens.


: Thank you for your substantive response (none / 0) (#52)
by lambert on Fri May 15, 2009 at 08:42:30 PM EST

But allow me to say that I am so, so grateful that you're gone.

You do know (none / 0) (#15)
by Big Tent Democrat on Fri May 15, 2009 at 10:28:51 AM EST

the NBA existed and thrived before LeBron James and will long after.

Take off your clown shoes genius.


So did banks (none / 0) (#18)
by ChiTownMike on Fri May 15, 2009 at 11:26:24 AM EST

In fact if it was not for banks a good argument could be made that there would be no NBA due to no financing.

That said LeBron was just a metaphor showing how ridiculous the guys post was.


: Bad metaphor (none / 0) (#22)
by Big Tent Democrat on Fri May 15, 2009 at 11:38:42 AM EST

BTW, which Master of the Universe (none / 0) (#16)
by Big Tent Democrat on Fri May 15, 2009 at 10:30:07 AM EST

is LeBron James in your view? The ones at Citi? Or the ones at BoA?

No wait, it is the AIG guys isn't it?


I don't know (none / 0) (#23)
by ChiTownMike on Fri May 15, 2009 at 11:44:58 AM EST

The owners of the Cleveland Cavaliers are Dan Gilbert, David Katzman, and Gordon Gund. Who do you think they bank with and borrow money from to pay LaBron?

Oh wait! Dan Gilbert is Chairman and Founder of Quicken Loans, the nation's largest online home lender.

Thrift applications by...Rock Holdings, which owns Quicken Loans, are still pending, according to the Office of Thrift Supervision's database.

So the guy who writes LaBrons checks is applying to be a bank so he can get TARP money!

Therefore LaBron's Master of the Universe is Dan Gilbert, Chairman and Founder of Quicken Loans.

You ask, I provide.


I asked (none / 0) (#30)
by Big Tent Democrat on Fri May 15, 2009 at 12:22:57 PM EST

and you provided the comic relief.

Take off the clown shoes.


So gald (none / 0) (#31)
by ChiTownMike on Fri May 15, 2009 at 12:29:20 PM EST

you find LaBron's Master of the Universe comical. That is a real turnaround for you isn't it?

I guess it is kind of funny that indirectly part of the millions that LaBron will be making will be financed through the government. Go Team USA! Dan Gilbert goes for the Gold!


: Gilt, Gald (none / 0) (#32)
by Big Tent Democrat on Fri May 15, 2009 at 12:31:02 PM EST

And so on.
Later dude.

The Fed would not need to set up branches (none / 0) (#17)
by ruffian on Fri May 15, 2009 at 10:53:15 AM EST

because every taxpayuer already has an account with the US Treasury. How about loaning people the money to pay what they owe the banks, at a better interste rate than the 29% many credit cards now charge, add it to their tax bill, and take payments over time, just like they can do now? Instead they 'loan' the money directly to the banks, if you want to call it a loan, and no one else benefits but the banks.


: So a SS number (none / 0) (#24)
by ChiTownMike on Fri May 15, 2009 at 11:49:59 AM EST

is now a credit application? And the Treasury has people who do that already? Not really but nice try even if it was a bit uninformed.
BTW I would have no problem with the government lending money to consumers and businesses. In fact they already do through loan guarantees with the SBA and FANNIE/FREDDIE.

Oh, ChiTown (none / 0) (#25)
by cal1942 on Fri May 15, 2009 at 11:50:01 AM EST

You so don't understand what that statement means.

Your whole comment is, well ... let's put it this way: Ian Welsh is no Bozo.


He is in that post. (none / 0) (#26)
by ChiTownMike on Fri May 15, 2009 at 11:54:03 AM EST

No. (none / 0) (#28)
by cal1942 on Fri May 15, 2009 at 11:57:28 AM EST

the post was outstanding. You still don't get it.

Someday you may understand. Apparently not today.


: It was void of facts and numbers (none / 0) (#29)
by ChiTownMike on Fri May 15, 2009 at 12:20:59 PM EST

No facts and numbers. Get it?
Never mind. Someday you may understand.

The Distinction Should Be... (none / 0) (#19)
by santarita on Fri May 15, 2009 at 11:28:28 AM EST

between what the banking system does and the existing banks which perform those functions. I think that is what Welsh meant.

It is possible that the Administration hasn't made that distinction or believes that only the present configuration of banks can perform those functions. It is also possible that the Administration is doing crisis management first with long term restructuring on the horizon.

Right now there are some promising signs and some not so promising signs. One of the not so promising signs is the possibility that the regulators were too soft on the banks in terms of forcing recognition of losses (an age-old struggle). One of the promising signs for those who advocate smaller institutions is that the increased capitalization requirements are forcing large institutions like Citi and Bank of America to shed business lines.

While it is true that how the Administration handles the banks will be part of its legacy, Congress should also be given some of the credit or discredit. It seems to be caving in all too frequently. And cannot be accused of pushing Obama in the right direction.

I thought that is what he said (none / 0) (#21)
by Big Tent Democrat on Fri May 15, 2009 at 11:38:23 AM EST

But maybe I misunderstood him.


: I Think That Is What He... (none / 0) (#27)
by santarita on Fri May 15, 2009 at 11:54:32 AM EST

was trying to say. What the banking system is and what the banking system does could be seen as one and the same. Or maybe I'm being too metaphysical on this fine Friday morning.

I originally misread (none / 0) (#34)
by Spamlet on Fri May 15, 2009 at 12:46:18 PM EST

his horrendous policy regarding the financial crisis

his horrendous policy regarding the financial crimes

and I think I misread correctly.

: You sure did misread right... (none / 0) (#35)
by kdog on Fri May 15, 2009 at 01:07:56 PM EST

by anyway I define "crime".
I caught a little bit of "The Sting" with Redford and Newman last night...the similarities are striking, only on a much larger scale. And Johnny Hooker thought taking Lonnegan was the big con...boy he had no idea, him and Gondorff shoulda got into politics or banking....now that the big con.

: Google on... (none / 0) (#39)
by lambert on Fri May 15, 2009 at 01:18:37 PM EST

William Black "accounting control fraud"
That explains the nature of the crimes. And the perps.

As of now, that will be his legacy. (none / 0) (#41)
by AX10 on Fri May 15, 2009 at 02:08:14 PM EST

This is bad.