"The crash has laid bare many unpleasant truths about the United States. One of the most alarming, says a former chief economist of the International Monetary Fund, is that the finance industry has effectively captured our government...
In a financial panic, the government must respond with both speed and overwhelming force... the longer the response takes, the longer the uncertainty will stymie the flow of credit, sap consumer confidence, and cripple the economy—ultimately making the problem much harder to solve. Yet the principal characteristics of the government’s response to the financial crisis have been delay, lack of transparency, and an unwillingness to upset the financial sector.
The response so far is perhaps best described as 'policy by deal': when a major financial institution gets into trouble, the Treasury Department and the Federal Reserve engineer a bailout over the weekend and announce on Monday that everything is fine. In March 2008, Bear Stearns was sold to JP Morgan Chase in what looked to many like a gift to JP Morgan. (Jamie Dimon, JP Morgan’s CEO, sits on the board of directors of the Federal Reserve Bank of New York, which, along with the Treasury Department, brokered the deal.) In September, we saw the sale of Merrill Lynch to Bank of America, the first bailout of AIG, and the takeover and immediate sale of Washington Mutual to JP Morgan—all of which were brokered by the government. In October, nine large banks were recapitalized on the same day behind closed doors in Washington. This, in turn, was followed by additional bailouts for Citigroup, AIG, Bank of America, Citigroup (again), and AIG (again)."
Our financial regulators didn't do their jobs. When reckless Wall Street fell apart, these officials chose to cover their negligence at the expense of millions of jobs, billions of investments, and trillions of our tax dollars.
Now because TARP money came with restriction on executive compensation, these banks used capital raised via FDIC's TLGP to pay back TARP and for bonuses.
FDIC was supposed to protect our deposits. TLGP was supposed to help improve lending.
FDIC's DIF ratio had fallen below the mandatory Congressional minimum since June 2008 and somehow the agency was capable of backing over $300 billion of bonds for Wall Street institutions like Goldman Sachs and Morgan Stanley, who did very little loan servicing to consumers and small business owners?
Yes, there was a huge problem with our system when FDIC could seize Wamu based on liquidity pressure but then turned around and launched TLGP to help solve liquidity issues merely days later!
Yes, there was a huge problem with our system when FDIC could help JP Morgan raise over $40 billion so the bank could fire over 10,000 employees in its Wamu "rescue," buy new jets, pay back TARP, and hand out billions in bonuses!"Ten Things You Might Not Know About Bonus Season...
8. In 2008, Jiang Jianqing, chairman of Industrial and Commercial Bank of China, the world's largest bank by market value, made $234,700 -- $96,372 of which came from his bonus. Jamie Dimon, chief executive of JPMorgan Chase -- the world's fourth-largest bank -- made $19.6 million...
9. In 2008, of the original nine TARP recipients (BofA, Merrill Lynch, Bank of NY Mellon, Citigroup, Goldman Sachs, JPMorgan, Morgan Stanley, State Street, Wells Fargo):
-- Over 800 employees at the nine firms were awarded bonus payments of $3 million or more each.
-- More than 200 employees at both JPMorgan and Goldman Sachs took home more than $3 million.
-- 4,793 employees at the nine firms took home $1 million or more. Of those employees, 1,626 worked at JPMorgan."
Again, what change?
"What to do about securitization? You know. the process by which banks slice up and pool loans into an investor-friendly treat, slathering each layer in a delectable coating of risk. The best part is the calories are totally off balance sheet, which means someone else puts on the pounds.
If you’re the FDIC, you shrug. As everyone knows, securitization contributed to the financial crisis by making the risk of losing money somebody else’s business. Instead of carrying whole loans on their books, banks are able to sell them off by the 'tranche' to investors shrewd, reckless or clueless enough to buy them.
Government regulators know well that securitization played a starring role in the housing bust. And until recently they seemed ready to do something about it. But evidently they’ve had second thoughts. The FDIC on Tuesday shelved a plan to tighten standards on securitization."
PLEASE give us CHANGE, NOT this:"Treasury Handed Out $38 Billion Tax Exemption... Obama was touting the 'profits' made by Treasury on the TARP repayments. What he wasn't saying is that not only did we flush the money (from TARP) that went into Chrysler (disclosed last night), we now find out that at the same time he was 'touting' the so-called 'profits' The President was handing that money straight back to the bailed-out companies via tax breaks!"
Oh well, back to Square One..."Lesson No. 5: There will be a next time. For all the past year’s talk in Congress about ending too- big-to-fail, Bank of America now owns Merrill Lynch. Wells Fargo owns Wachovia. JPMorgan Chase owns Washington Mutual and Bear Stearns. Goldman Sachs and Morgan Stanley have become bank- holding companies, giving them access to the Federal Reserve’s discount window and other subsidies. If any of them got in major trouble, there’s almost no doubt the government would intervene. "