Posted on 06/12/2010 2:27:43 AM PDT by CutePuppy
Yes, but how do you tell these GOP "leaders" to tell this story when they are still too busy to dissociate themselves and to run from TARP? See post #14.
Lehman study shows Obama's favorite Banker JP Morgan caused the run on Lehaman for JP Morgan's gain.
Right, just like 0bambi Motors repaid their loan early.
Are you sure it Bush that had anything to do with the UAW and GM getting TARP funds ? I thought that diversion from the original intent of TARP happened after Zero took office.
skr: If your question was referring to where did the banks get the money to repay TARP, then I think the answer is that they didn’t really need the money in the sense that they didn’t need to “spend” it like GM and UAW did. The banks were forced to take it so they could meet cash requirements since their “assets” of mortgage backed securities and credit default swaps became so questionable. They wrote down those assets and cleaned up their balance sheets so they no longer needed to show as much “cash” on hand. As Congress’s TARP panel was intrusive, the banks got out by repayment as quick as possible.
'Splain that, please. Many say that TARP saved us from financial collapse, but none describe the mechanism by which that was accomplished, nor do they describe how it so definately would have collapsed had TARP not taken place. The best I can see is that some entities would have failed (GM and UAW, a few big corrupt banks) and some would have survived and thrived. This almost reminds me of the global warming debate, where "the science is already settled".
Oh, and what's this "improvement in the economy" that people keep talking about?
It's another accounting trick.
LLS
Most of the voters are so clueless about capital markets that they cannot be convinced backstopping the “greedy banks” was a good idea. They think it is obvious that giving money to the people to spend must drive the economy, and can’t fathom that doing so creates no net economic activity as it stole from Peter to give to Paul.
If you’ve seen any of the recent WSJ articles on the issue, surveys have shown the more liberal people are, the more ignorant of economics. But the scores on those econ surveys are nothing to brag about even for the self-labeled conservatives and libertarians.
I envy your location. West - by God - Virginia is an awesome state. I have roots there, and I’m sure that there are many second, third, and fourth cousins still in state.
When push comes to shove, you have all the coal you need to keep your home warm at night while the leftists wait for some substantial wind so that they can enjoy a faint glow from their lone compact flourescent lamp.
PBO’s spending the repaid money, since it isn’t on his books. It’s free money to him, since W borrowed it from China and our grand kids get to repay it.
Yep - and they don’t tell us how much of that merely came from other loans like the GM “payback”. I suspect that some of the banks are making true repayments, but a lot is merely coming from the back pocket to the front pocket with a net zero effect to the taxpayers.
I did better than that. I bought a piece of land that now has a gas well, and I get royalties, and all the gas I can use. It's a matter of doing your homework. I have a home that can run on gas... and a little PV, if I don't want to run a generator. I have a big pantry, and steel roll-up doors! I have also a good investment in expendables... and the equipment to use them!
No story here. Move along!
GM, Chysler and UAW are not financial institutions and are not part of the financial system (AIG was by virtue of its derivatives / CDSs and insurance of some financial services or products). Financial institutions were under attacks / "bear raids" from the equity markets and subject to "run on the banks" (like Bear Sterns or later IndyMac, precipitated by Chuck Schumer). The biggest "run on the bank" occurred immediately after Lehman's bankruptcy, started with massive electronic withdrawals from Reserve Primary Fund and other MFs. That froze interbank fund loans (LIBOR spreads soared) and rendered illiquid and devalued commercial papers, and various companies' formerly liquid investments such as ARS. In other words, illiquidity and loss of paper value and ability to borrow money was affecting all companies and real economy very fast.
TARP fund provided liquidity and immediately removed the panic, stopped "runs on the bank", allowed the "netting" of accounts between counterparties and thus unfroze much of the commercial paper and ability to borrow (LIBOR spreads went down immediately after TARP passed) and allowed real economy to resume.
This was not about "bailing out" insolvent companies, it was about adding liquidity and unfreezing financial system, for which government / Fed is responsible and conduits are the banks. Insolvent banks and institutions (Countrywide, Bear Stearns, IndyMac, Lehman, WaMu, Wachovia etc.) and their investors were not "bailed out," their depositors (you and me) were. The solvent ones were helped out temporarily by TARP to absorb losers so the depositors wouldn't suffer (even when their shareholders did, as the case was with BoA and, to lesser extent, JPM). Fed and Treasury even made money on Lehman's bankruptcy.
... nor do they describe how it so definately would have collapsed had TARP not taken place.
See "Greece" and its chain reaction for a recent example. The difference, of course, is between companies which are conduits of financial system and sovereign financial system (which is a part of ECB / Euro financial system), but the mechanism and consequences are about the same.
Oh, and what's this "improvement in the economy" that people keep talking about?
Some people live in pre-9/11 (9/10) world, some people don't see the financial equivalent of such before Lehman's bankruptcy (9/14) and after. Again, see "Greece". If you didn't see the financial collapse unfolding after Lehman's bankruptcy, you could hardly see or foresee the ramp-up to it for about a year before it.
Unfortunately, Bush started the process; Zero seized the day and later put it in overdrive, by nationalizing them.
How The Hell Did GM Pay Back Its Loans "in Full And Ahead of Schedule"? Well, It Didn't. - posts #12 and #52, with timeline and supporting links.
If you follow the thread a bit further, you will not be disappointed in my voluminous expression of OPINION and/or ANALYSYS. Whether it will elevate or enlighten, is not up to me to decide.
The rest of discussion in the post is mostly about personal investment decisions from which I am going to abstain. My views on energy choices I have expressed and will continue to express on other related threads.
Enjoy the Kool-Aid.
Not my beverage of choice, and I often recommend alternative, sometimes stiffer, but always more reasonable choices to others.
Have a nice day.
Thank you, and I wish the same to you.
Sounds like some banks were grossly over-leveraged. Question - who was doing the electronic withdrawals? Was it a "panic" or an attack?
TARP fund provided liquidity and immediately removed the panic, stopped "runs on the bank", allowed the "netting" of accounts between counterparties and thus unfroze much of the commercial paper and ability to borrow (LIBOR spreads went down immediately after TARP passed) and allowed real economy to resume.
So basically, tax dollars were used to preserve a system (or at least several large entities within a system) that was supposedly collapsing due to bad lending practices and insufficient cash reserves? Is that what I'm gathering from this?
This was not about "bailing out" insolvent companies, it was about adding liquidity and unfreezing financial system, for which government / Fed is responsible and conduits are the banks. Insolvent banks and institutions (Countrywide, Bear Stearns, IndyMac, Lehman, WaMu, Wachovia etc.) and their investors were not "bailed out," their depositors (you and me) were. The solvent ones were helped out temporarily by TARP to absorb losers so the depositors wouldn't suffer (even when their shareholders did, as the case was with BoA and, to lesser extent, JPM). Fed and Treasury even made money on Lehman's bankruptcy.
Are the depositors not protected by FDIC? How much less would it have costed taxpayers to let these entities fail and simply insure depositors as written in law? Would failure of these entities resulted in overall economic collapse?
See "Greece" and its chain reaction for a recent example. The difference, of course, is between companies which are conduits of financial system and sovereign financial system (which is a part of ECB / Euro financial system), but the mechanism and consequences are about the same.
Some people live in pre-9/11 (9/10) world, some people don't see the financial equivalent of such before Lehman's bankruptcy (9/14) and after. Again, see "Greece". If you didn't see the financial collapse unfolding after Lehman's bankruptcy, you could hardly see or foresee the ramp-up to it for about a year before it.
Oh, Greece is coming here. They're just a couple of socialistic steps ahead of the US, that's all.
The way I see it, the TARP and subsequent bailouts just kicked the can a little farther down the road. Excessive leverage on the private side has been replaced by excessive borrowing on the government side. The result will be the same, only more intense since there is no backstop left. Unless we change directions and start unraveling government debt, I expect the same kind of reaction here that we are seeing in Greece, but there will be nobody left to bail out the US government.
BTW, it's hard to see a financial collapse coming as a result of the failure of Lehman, when ones' savings are intact at the credit union and ones' credit card still works at the local BP station. In other words, the connect between these macro events and the micro world isn't easily seen. The fact that few (if any) of us seemed to have endured any economic downside at that time perhaps lends to the idea that this wasn't necessary, and that the problem was manufactured. I don't believe that to be true, but I do wonder of the consequences of inaction might have been overstated.
Every saver is paying for this at least twice. First, because of the Fed’s manipulation of interest rates, the banks are able to raise huge amounts of money by investing in the carry trade. Savers are subjected to ZIRP (zero interest rate policy) while the money centers use these trapped funds to buy T-Bonds yielding about 4%. Of course, the downside of this is that if and when rates rise, the banks will experience huge capital losses on the T-Bond holdings.
So, this is a peculiar case of double dipping: We taxpayers pay now, AND we pay later.
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