TARP Repayments: Media Continues to Trumpet Unjustified Positive Economic Spin 14 comments
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One of the big stories yesterday was the NY Times propaganda trumpeting the massive "gains" the government is making on the bailout process. The FT also ran a story bloviating about profits from the rescue programs. Both have been dissected by multiple sources already (NakedCapitalism, Denninger,) but I thought Barry Ritholtz's explanation of the truth was the simplest.
Looking just at early TARP repayments means that we are ignoring a) the rest of the TARP; and b) the majority of other expenses, guarantees, loans capital injections, and outright spending that has taken place.
One thing is for certain - the past 9 months have given us the most remarkable propaganda campaign the financial press has ever seen. Every headline is mandated to be spun positively, regardless of the degree of misquoting that takes place.
I looked at one blatant example of this when Nouriel Roubini was viciously misquoted a few months ago, but you can see it almost every day with the press touting how everything is getting better because we merely lost 540,000 jobs last week, which is much better than losing 700,000 jobs. Tell that to the 540k newly unemployed. Similarly, when the number of continuing jobless claims decreases, the press spins it positively. I was one of the first to anticipate this phenomenon back in early June when I wrote about people exhausting their unemployment benefits.
Last week, I was raising an eyebrow when the mainstream media headline was "Meredith Whitney: Fears of bank solvency are behind us." Now, reading that quote, you'd think Whitney was bullish right? But that would be hard to believe, so then you go watch the video. What Whitney actually said was:
"We are early on in terms of bank closures"
"We estimate there will be over 300 bank closures (there had been 78 so far)"
"The small business owner on main street continues to see liquidity come away from him"
"Spending is going to take a long time to come back"
"I don't expect consumer spending to come back anytime soon"
Obviously, she wasn't bullish. Look - you can't cure the economy by lying to the people to foster confidence. This is a tough realization for economists, because they are used to confidence being a main driving force in the economy. If people think things are ok, they borrow more and spend more, which in turn is a self fulfilling prophecy to MAKE things ok. The problem is that currently, confidence matters less than ever, because even if the consumer has confidence, he doesn't have money, the capacity to take on more debt, or a job. You can't spend confidence.
Lest someone accuse me of whining without solutions, I'll remind you of the proper solution: RECOGNIZE bad debt instead of continuing to pretend it will work itself out eventually. Stop funding insolvent institutions and use those funds to seed new, healthy banks instead. We have a capital structure in place where there are rules about what happens when a company loses lots of money: first the stockholders take the losses, then the bondholders take the losses. The taxpayer does not fall anywhere in that hierarchy - CERTAINLY not before the bondholders and stockholders! Bank bondholders need to restructure debt to recapitalize the banks - just like the auto manufactures did.
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You hit the nail right on the head. The media is trying to spin us out of a problem that requires strong medicine and tough love. Bailouts are certainly not the solution and only prolong the problem. The people of the US are not going to stand for allowing a government to place them in a position that rewards bad business decisions and lowers our standard of living. When the government takes a stand and stops the bloated spending, the sun will begin rising on a great new day. It will take courage, which our congress and the President hasn't shown yet.
ik1
The numbers that I have seen place the return somewhere between 15-20%. To give you an idea of how bad the deal was : There was publically traded bank debt from Morgan Stanley which was generating 15% per day at the time that the TARP was announced. There wasn't 100 billion of it, but it was better than 15% per year.
Lest someone accuse me of whining without solutions, I'll remind you of the proper solution: RECOGNIZE bad debt instead of continuing to pretend it will work itself out eventually." exactly to the point,
I just read a piece "Spain: The Hole In
Europe's Balance Sheet" offered by John Mauldin, Editor Outside the Box, concerning the deflationary problem facing Spain, very scary piece because it goes directly to your point about the ramification of not dealing with economic reality, it seems that deflation is creeping into several economies and taking hold, makes one wonder about the US, we seem to have done and are doing many of the same things as Spain,
This will never happen with the Politicians we have in Washington, in the States, and local governments...they all know we can PRINT money....Prepare for this NOT happening
The bondholders are probably as bad at managing capital as the current leaders. Keep in mind, they use to lend money to Chuck Prince. Secondly, we have a massive over-capacity in banking. Reorganizing the existing banks is just reorganizing deck chairs on a sinking ship. Sure we "saved" banks, it is at a cost of small banks which will be dissolved by the FDIC.
The solution needed to incorporate well run banks eating the weak.
Weren't we told that the press had "learned from its mistakes" and would now be more skeptical and investigative? Seems not...
"Lest someone accuse me of whining without solutions..."
No one has to accuse you.
You confessed and convicted yourself in a mere 550 words of drivel.
No one is fooling anyone (except the conspirators leading you astray) on TARP or anything else. We are arguably far ahead of where we were a year ago, with weekly failures and shotgun marriages of major financial institutions. We are a long way from a sound, fully solvent financial system. The TARP repayment coverage claims nothing more.
The governments were not throwing billions of $'s at the problem when shotgun marriages and failures were taking place. So if taxpayer bailout of failing businesses is your idea of "arguably far ahead" don't mention the word drivel in your critique of others. You win the award for drivel!
On Sep 01 10:58 AM Sacandaga wrote:
>
> "Lest someone accuse me of whining without solutions..."
>
> No one has to accuse you.
> You confessed and convicted yourself in a mere 550 words of drivel.
>
>
> No one is fooling anyone (except the conspirators leading you astray)
> on TARP or anything else. We are arguably far ahead of where we were
> a year ago, with weekly failures and shotgun marriages of major financial
> institutions. We are a long way from a sound, fully solvent financial
> system. The TARP repayment coverage claims nothing more.
1) we bailed Chrysler out once before, remember? We had to do it again.. so did we 'fix' the problem with the original bailout? No, we moved it into the future - today's present.
2) (believe it or not) the left-leaning press has a bias towards the Obama administration, and presenting the 'facts' about how effective TARP and other initiatives the administration has supported in a favorable light is a natural outcome of that.
Oh, and one last thing, sacandaga (sack 'o what?) - conspirators? So this, like the fact that there are lots of good Americans speak their minds at the health care town halls, is another grand right-wing conspiracy? Come back to earth, take a deep breath, and try to take an objective look around you!
Bad news is simply not reported by the MSM, or if it is, it must be spun until it comes out like cotton candy. Everything is "less bad" or "showing improvement" in some absurd, alternate universe kind of way.
It should come as no surprise that major newspapers are going bankrupt as readership dwindles. Network news is almost irrelevant. MSM is in a neck-and-neck race with Congress to the bottom of the sewer.
During this financial mess, many have discovered that there still exists a relatively small group of outstanding reporters who not only dig for the truth, but present it in a matter-of-fact style.
They respect their readers by presenting the evidence in a manner that journalism students used to be idealistic about-- without bias or prejudice or agenda. Those who do offer opinions do not disguise them or try to trick us with the MSM's favorite tactic-- the lie by ommission.
A tip of the hat to the small group of financial bloggers ( Some are found here at SA) who, by their integrity, demonstrate daily what a disgrace the mainstream media has become.