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Spinning the banker bailouts

by Jerome a Paris Tue Oct 14th, 2008 at 07:21:08 AM EST

Gideon Rachman has an article evaluating the performance of our leaders during the recent credit crisis, and which is suggesting that the proponents of the neolib narrative are certainly not willing to give up or concede anything. Also interesting is, of course, what is left unsaid in that current debate.

Rachman's conclusions are that Bush was hopeless, the Germans hypocritical and inconsistent, Sarkozy did reasonably well, and Brown did the best. He is especially scathing about the comment by Steinbrück about the US's loss of financial dominance (mocked, as in various other places, as premature Schadenfreude) and happy to note that it is British civil servants who are saving the day with their now widely-imitated bank rescue plan.

Unsurprisingly, the ranking closely mirrors the preferences of the deregulating neoliberals: the pro-City NuLabor, followed by the pro-Anglo-Saxon Sarkozy, with the too-continental Germans dismissed and the toxic Bush administration thrown in the dumpster. And the none-too-subtle message is: the "reformists" are still the best("reform" being the usual cocktail of labor market deregulation, tax cuts, pro-free-trade pro-big-corporation-profits policies).

A parallel tune can be found in various ministers' comments that this is not a bailout, but an "investment" that will yet turn a profit for shareholders. This is a nod to the public outrage as seeing hundreds of billions of taxpayer money thrown at the very bankers that created the mess in the first place, and an attempt at placating opposition to such largesse. It helps maintain the notion that the goal is to "make a profit" (ie everything is still valued only through the monetary lense, a core component of the Anglo Disease), but it also opens the door to at least two vital debates that must be brought to the fore to replace the "reformists do best" tune:

  • that on the role of government, and its rehabilitation. The very people that explained to us that governments were incompetent and had to be shrunk had no recourse but to go for government money, guarantees and action when they drowned in their own mess. The conclusion here HAS to be that (i) governments play a valuable role and thus cannot be continually starved and (ii) those that pushed the anti-government propaganda have to be seen as cranks, liars, fools or crooks, and treated with the contempt they so richly deserve - which includes no longer listening to their self-serving economic "advice";
  • that on what could be done with an investment of a trillion or so euros of public money in things like energy efficiency, public transportation, housing, poverty reduction. All of these things create massive positive externalities that benefit society as a whole, and would be especially helpful as we face the banker-caused economic downturn, collapsing real estate sector and high energy prices. If we can justify blowing a trillion on incompetent bankers that threaten to take us down with them as "investment", then we surely can actually invest in the economy in ways that will benefit all and not just a greedy few.
It is no thus surprise that Rachman's ranking (which I have seen also in the WSJ and the Economist) reflects a preference for those that have been most effective at disguising government-destroying policies behind bland populist discourse, and whose actions today still fundamentally go in the direction of making the State a tool of the financial markets, rather than the representative of the public interest.

That fight on spinning the current crisis is just starting, and it has to be fought vigorously.


Display:
http://www.dailykos.com/storyonly/2008/10/14/72127/583/545/629989

Thanks for your support.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Tue Oct 14th, 2008 at 07:29:19 AM EST
A top flight analysis, and I'm very pleased that you are vigorously fighting the criminal spin.  The great horror for in trying to wrap my mind around this whole nefarious situation is summed up neatly in your point on investment.

What we could do with the level of funds behind the prop-up!  Beginning with wind and solar, there's enough work and positive effect to society in general we could already be working our way out of this pit the bankers threw us in.

Potshots at Germany's stable banking system indeed.  Arschloch.

"Life shrinks or expands in proportion to one's courage." - Anaïs Nin

by Crazy Horse on Tue Oct 14th, 2008 at 07:33:56 AM EST
yup, i'm so furious about this when it's put so directly...

i'm seeing red right now....gotta relax....

it's as stupid as setting ourselves up for 50 years with the EU as the USA and Russia acting the role of the middle east.

it makes me want to scream, people, don't you get it?

how the convenience of banks has led to their having a silken cobweb of dysfunctional codependency permeating throughout every level of society.

i see a future where the words 'bank' and 'government' are fused as one, they are so obviously symbiotic.

failed economies, failed states, what's the difference?

let's stop the pretence already!

failure proves we're as bound at the hip to economy and policy as siamese triplets, the big change we can hope for is to make it that profits are nationalised and redistributed, not just losses.

the biggest problem before of socialism was it stifled innovation because of no decent market incentive.

the rise of free stuff on the internet points to a cultural shift since it was last tried.

'The history of public debt is full of irony. It rarely follows our ideas of order and justice.' Thomas Piketty

by melo (melometa4(at)gmail.com) on Tue Oct 14th, 2008 at 08:38:42 AM EST
[ Parent ]
Spin will come from many places:


Europe to U.S.: You messed up the rescue, too

PARIS (Fortune) -- First you mess up the world's financial system. Then you blow the rescue of it. Now let's show you how to do it properly.

That, in a nutshell, is the less-than-flattering message European governments are sending to the U.S. as they mount their own gigantic bank bailout. The plans, announced Monday after two weeks of dithering, involve Britain, Germany, France and some others recapitalizing national banks that require help, and providing state guarantees and other measures to kick-start the stalled credit market. The details are strikingly different from the U.S. approach adopted by U.S. Treasury Secretary Hank Paulson and the Federal Reserve Board. And there's a big reason for that: The Europeans think Paulson got it badly wrong, and have watched aghast as he failed to restore confidence in the world's financial system.

Sadly, that article also has this rewriting of history:


Stock markets for the moment are applauding the concerted European response. Only time will tell whether they're getting it right. It puts a huge onus on governments to fix the system, and the track record there is mixed. France nationalized its banks in the 1980s under President Francois Mitterrand for ideological reasons, but made such a mess of the job that it privatized them again.

French banks were nationalised (those that were not already public then) because, just like a number of the other companies that were nationalised, they were severely undercapitalised. They were sold off in much better shape than they were when bought, and for a substantial profit, not because they were "such a mess."

But of course writing such lies is part of the propaganda war being waged right now.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Tue Oct 14th, 2008 at 07:37:17 AM EST
This seems like extending mass amounts of debt in the balance sheets of the real "lender of last resort", i.e., the state.

While there is of course the obvious issue that public debt was bad to finance health, education, public infrastructure and so on but is suddenly good to bail out banks, there is also another issue:

If the states get buried in debt, and the system is not corrected to stop the credit binge (and accumulation of wealth at the top) who will save us in the next crisis? god?

To put it in another way: Are we creating the last possible bubble?

by t-------------- on Tue Oct 14th, 2008 at 08:19:11 AM EST
Am I the only one thinking that someone with a few more letters in front of his or her name than I have should send those two bullet points as an LTE? Something along the lines of

Dear Sirs,

Over the past few months, the very people that for decades have explained to us that governments were incompetent and had to be shrunk had no recourse but to go to the government for money, guarantees and action when they drowned in a mess of their own making. From this, it would appear obvious that (i) governments play a valuable role and thus cannot be continually deprived of the resources they need to fulfil those functions, and (ii) those that consistently pushed an across-the-board anti-government agenda should perhaps now be recognised as shill extremists, rather than serious and worthy participants in the public discourse.

Further, it would be worthwhile to ponder what could be done with an investment of a trillion or so euros of public money in things like energy efficiency, public transportation, housing or poverty reduction. All of these things create massive positive externalities that benefit society as a whole, and would be especially helpful as we face the banker-caused economic downturn, collapsing real estate sector and high energy prices. If we can justify sending a trillion € down the rabbit hole to chase incompetent bankers that threaten to take us down with them as "investment", then we surely can actually invest in the economy in ways that will benefit all and not just a greedy few.

With regards,
[signed, etc.]

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Oct 14th, 2008 at 08:42:18 AM EST
It's probably too soon after the previous letter to send them this, but hey, it's worth doing anyway.

Maybe someone can also post a link to ET and this post over on Gideon Rachman's blog?

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Tue Oct 14th, 2008 at 09:13:41 AM EST
[ Parent ]
Sounds great, I see one problem: most of that €1.1 trillion would only be guarantees, not going down the rabbit hole; and they claim that the stocks in whose purchase most of the rest is going into could be sold for profit later, thus also not going down the rabbit hole. Then again, the latter argument could be made about a lot of other state investments, too.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Tue Oct 14th, 2008 at 11:05:44 AM EST
[ Parent ]
(no link to original)


Money to build and generously equip thousands and thousands of new schools, with well-paid, exquisitely trained teachers, small teacher-pupil ratios, a full range of enriching and inspiring programs.

Money to revitalize the nation's crumbling inner cities, making them safe and vibrant places for businesses and families and communities to grow.

Money to provide decent, affordable and accessible health care to every citizen, to provide dignity and comfort to the elderly, and protection and humane treatment for the mentally ill.

Money to provide affordable higher education to everyone who wanted it and could qualify for it. Money to help establish and sustain local businesses and family farms, centered in and on the local community, driven by the needs and knowledge of the people in the area, and not by the dictates of distant corporations.

Money to strengthen crumbling infrastructure, to repair bridges, shore up levies, maintain roads and electric grids and sewage systems.

Money for affordable, workable public transport systems, for the pursuit of alternative sources of energy, for sustainable, sensible development, for environmental restoration.

Money to support free inquiry in science, technology, health and other areas -- research unfettered from the war machine and the drive for corporate profit, and instead devoted to the betterment of human life.

Money to support culture, learning, continuing education, libraries, theater, music and the endless manifestations of the human quest to gain more meaning, more understanding, more enlightenment, a deeper, spiritually richer life.
The money for all of this -- and much, much more -- was there, all along. When they said we couldn't have these things, they were lying -- or else allowing themselves to be profitably duped by the high priests of the market cult. When they wanted a trillion dollars -- or three trillion dollars -- to wage a war of aggression in Iraq, they found it. Now, when they want trillions of dollars to save the speculators, fraudsters and profiteers of greed in the global market, they suddenly have it.

Who then can believe that these governments could not have found the money for good schools, health care, and all the rest, that they could not have enhanced the well-being and livelihood of millions of ordinary citizens, and helped create a more just and equitable and stable world -- if they had wanted to?

This is one of the main facts that ordinary citizens around the world should take away from this crisis: the money to maintain, secure and improve the lives of their families and communities was always there -- but their governments, and their political parties, made a deliberate, unforced choice not to use it for the common good. Instead, they subjugated the well-being of the world to the dictates of an extremist cult. A cult of greed and privilege, that preached iron discipline to the poor and the middle-class, but released the rich and powerful from all restrictions, and all responsibility for their actions.



In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Tue Oct 14th, 2008 at 09:12:24 AM EST
It's from Chris Floyd's The God that Failed: The 30 Year Lie of the Market Cult.

The whole thing is worth reading.

"The money was there all along."

by Bruce F (greenroofgrowers [at] gmail [dot] com) on Tue Oct 14th, 2008 at 09:34:16 AM EST
[ Parent ]
Another good read, from beerm:


Government does well

The great success of the American Government is that it is largely invisible. I am not talking about secrecy, what I am talking about is the number of things that the goverment does that are taken for granted by Americans.

Everyday, people drive on roads built and maintained by the government. You go to the supermarket and do not worry that your meat and milk is tainted. You turn on the tap and clean water comes out, the dirty water then flows down the drain, often because of the government. You call the police, the fire department and they come. You can mail your payments through the mail. A lot of these things don't happen in other countries.

The government was good enough to win WWII, put men on the moon, and bailout the "financial experts" both in the 30's and now.

The number of things that the government enables on a daily basis is astounding. It is also largely unnoticed until if fails. What is amazing about something like the I-35 bridge collapse is that it is the exception, not the rule.

Few people realize that less than 10% of the federal budget is debated publicly. Most of the spending goes to continuing things like food inspectors, bridge inspectors, etc. all the little things that we rely on being there during our daily life.

My 13 year old son and I started having this discussion yesterday because of our local library. I pointed out that the government funded the library because it was a public good. He noted that not everyone used the library. I noted that it was available if they wanted. Not all countries have public libraries. Try finding a Salman Rushdie book in a Saudi library, I'll bet you can find a Koran in ours.

(I would like to note that my 13 year old, along with many of his classmates, asks more intelligent guestions than anybody on Fox News. )

The government is different from private industry in a couple of notable ways.

First, it is largely undercapitalized for the things that it does. Few companies would want to run the National Parks on the Park Service budget.

Second, it does its business in public. As we are finding out many CEO and boardrooms cannot stand the public scrutiny that is leveled on the government everyday.

Ronald Reagan was grandstanding. It is easy to find mikstakes, even wrongdoing in an organization with millions of employees. There is not another company with as many employees. Reagan was dead wrong in stating that government was the problem. The real problem was that Reagan didn't understand the government and what it does for people.



In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Tue Oct 14th, 2008 at 10:43:04 AM EST
[ Parent ]
I thought that a great argument. The trick, as always, is to persuade American voters that (1) "investment" or debt to socialize benefits mitigates individual outlays; and (2) Congressional incumbents are not remotely interested in legislating appropriations that do NOT guarantee revenue to profit-taking firms in the business of supplying general utilities, that small set of human "rights".

OK. That was awkward.

Diversity is the key to economic and political evolution.

by Cat on Tue Oct 14th, 2008 at 02:19:57 PM EST
[ Parent ]
So are you/we all involved in a "war of words"?  Will there be any casualties?  Will changes somehow just "happen"?  What is the "there" you wish to get to and how do we get "there"?  Through LTE's?  Elections?  Will the ultra-wealthy have an epiphany, realize the error of their ways, and turn over their ill-gotten goods for the sake of the species and the planet?

They tried to assimilate me. They failed.
by THE Twank (yatta blah blah @ blah.com) on Tue Oct 14th, 2008 at 09:35:44 AM EST
Go ahead and make the case that nothing short of the public execution of Republicans will lead to results. Your turn.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Tue Oct 14th, 2008 at 11:09:20 AM EST
[ Parent ]
Why would you POSSIBLY suggest such a HORRIBLE event.

Oh MY!  Now my hemorrhoids are acting up!  And my G-string is cutting into the crack in my ass!  Ooooh!  Ooooh!

PLEASE!  NEVER suggest such a thing again!  

:)   :)   :)   :)  !

They tried to assimilate me. They failed.

by THE Twank (yatta blah blah @ blah.com) on Tue Oct 14th, 2008 at 04:32:00 PM EST
[ Parent ]
Below is the body of a letter I am sending via fax to my representatives, current, past and other, on the situation in the US.  I fear that the euphoria over the current "solution" by Paulson of injecting $250 billion into existing banks will shortly evaporate.  I don't know how long "shortly" might be.
On October 7  John Greenwood reported in The Financial Post, (Canada,) that  grain shipments were backing up at ports in the US due to buyers being unable to obtain letters of credit acceptable to sellers due to fear of institution risk,  i. e.,  fear of the lending institution going out of business before the letter is cashed.  Bill Gary, president of Commodity Information Systems in Oklahoma City cited this problem.  Such a problem can quickly bring all international sales of bulk goods to a halt and clog railroads and waterways with car and barge loads of goods.  This sets the stage for the collapse of agriculture in the U.S and for famine abroad.  Add this to the lack of availability of affordable commercial paper for industry, student loans, new mortgages, consumer credit, etc. and the whole society can seize.

The Federal Reserve can try to step into the breach, but it is not equipped to perform due diligence on all of these additional transactions and doing so would put it into an inherent conflict with its mission of  supervising banks, as it cannot properly supervise its own new banking activities without conflicts of interest and mission.  The latest plan is to try to shore up existing banks by injecting new capital.  This is almost certain to fail.  Were the food supply contaminated with deadly poisons only the Bush FDA might propose a remedy which consisted of adding a small amount of known good food to that supply.  Foreign buyers don't know which institutions can be trusted and which cannot.  With potential derivative liabilities leveraged at 30 to 1 overlaying 40% declines in real estate values backing mortgages, who can blame them?

If even a fraction of the $700 Billion being proposed for a Wall Street bail out were used to provide equity capital for new, untainted banks, we could "thaw" the financial system.  These banks should be required to operate under 1970s style banking regulations.  As banks typically hold a 3% capital reserve, $269 Billion would back over $8.96 trillion of new loans.   That should get the economy functioning again.  Use the money to establish 538 banks, one for each electoral vote, each with $16.66 billion loan capability, each located in the area represented by the vote.  There should be plenty of sadder but wiser bankers available to staff these institutions.  These new banks would be  free of the  taint of contamination from previous bad practices.  They could in time be acquired by private interests on the same terms as formerly used to determine the price for private financial institutions.  Or not.

Exporters could get letters of credit, businesses and local governments could get operating capital, consumers could finance purchases,  people could get home loans.   Let Schumpeter's "creative destruction of capitalism" go to work on Wall Street.  The economy would no longer be held hostage to Wall Street.  This will be opposed by the financial services industry.  They want the money, even if there is not enough to solve the problem.  It will be opposed by the Bush Administration.  It contradicts their ideology.  It would be like a hostage taker releasing their hostages before securing their demands.  But time is up for ideology and special interests.  The time is long past for us to start acting to protect the real economy and let high finance take care of its own problems.  We should be trying to get money back from these crooks, not be giving them more.  Make certain at least some of this money is used in a way that can actually solve the problem.

Comments or criticisms?

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Oct 14th, 2008 at 10:57:54 AM EST
Oh, I don't know that this week marks the beginning of spin. Your points are well-taken. However there are numerable instances in the MSM that document the PR roll-out, as it were, to re-define graft -- whether one's focus is present tax revenue, "liquidity," or obligated future revenue.

I'm pretty sure someone Serious publicly proclaimed that it is IMPORTANT that "taxpayers" understand the JPM-BSC guaranty is not a "bailout." That remark caught my eye, because I wrote an article the week the merger was announced. I'm still looking for the link on my HD.

I should have started a bookmark directory titled "Pelosi Opens Damn Mouth Again", when she announce during the summer of '06 that impeachment was off the table. She was not yet elected speaker. And I didn't. She continues though to telegraph reliably House consensus, regardless of caucus bias, on its activities prior to enrollment of any legislation as well as US allied policy implementation. Consider this PR placement following House rejection of EESA and prior to its amendment to H.R. 3997 (29 Sep) --THEN-- amendment of H.R. 1424 to the senate "conference" bill (1 Oct) which engrossed mark-up language (emendments to EESA) and pork.

It's not a bailout, it's a buy-in | LA Times | 28 Sep 2008

House Speaker Nancy Pelosi, evidently with a straight face: "This is not about a bailout of Wall Street. It's a buy-in so we can turn our economy around" and protect the assets of ordinary Americans. Well, now I feel so much better about it. I'm buying in! I'm getting a piece of financial products that are so worthless that there's no market for them.

Viles runs a blog dedicated to tracking Orange County, CA real estate marketing.

Diversity is the key to economic and political evolution.

by Cat on Tue Oct 14th, 2008 at 02:04:54 PM EST
Regarding Pelosi's air cover for the Bush Administration:
Barbara Boxer takes exception.  When asked directly by Rachel Maddow if she supported post election investigation into the constitutional issues under the Bush administration, she said she did.  That is one.

link:http://www.msnbc.msn.com/id/21134540/vp/27170845#27171359

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Oct 14th, 2008 at 02:32:33 PM EST
[ Parent ]
That link is broken to my machine. Please check the URL for typo.

Diversity is the key to economic and political evolution.
by Cat on Tue Oct 14th, 2008 at 02:34:54 PM EST
[ Parent ]
It just worked on my machine.  If you can get to her page at MSNBC there will be a clip about Obama.  It is in that segment.  Perhaps they didn't think enough people would know who Boxer is.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Oct 14th, 2008 at 02:56:49 PM EST
[ Parent ]
OK. I searched MSNBC. How was I supposed to know how frequently Boxer appears on Maddow's or Matthew's show? I don't watch that shyte. That's why I always link to transcripts to politicians.

Would you narrow the period or date the show to which you refer? Frankly, Feinstein, Boxer, and Pelosi are wicked willows.  

Diversity is the key to economic and political evolution.

by Cat on Tue Oct 14th, 2008 at 03:48:40 PM EST
[ Parent ]
It is what is currently up. Yesterday's show. MSNBC home.  Search "Rachael Maddow," click on any current segment, get to a page that is loading a video segment. It will have a series of ~1" thumbnails for various segments.  Click on the one about Obama.  I will, for future reference, see if I can find transcripts.  I know I usually can for PBS.  I can only provide this inadequate assistance because I just had to go through it, as I didn't have her show bookmarked.  I am an original clutz when it comes to this stuff.  

PS, you will almost certainly be disappointed, anyway.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Tue Oct 14th, 2008 at 04:09:00 PM EST
[ Parent ]


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