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Obama refuses TARP repayment, so he can keep control over the Banks

Discussion in 'Political Discussion' started by FreeTedWilliams, Apr 5, 2009.

  1. FreeTedWilliams

    FreeTedWilliams pfadmins PatsFans.com Supporter

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    #75 Jersey

    For anyone left who is not convinced that Obama is a socialist...

    Barack Obama Maintains Control Over Banks By Refusing to Accept Repayment of TARP Money - WSJ.com

    bank is begging to give the money back. The chairman offers to write a check, now, with interest. He's been sitting on the cash for months and has felt the dead hand of government threatening to run his business and dictate pay scales. He sees the writing on the wall and he wants out. But the Obama team says no, since unlike the smaller banks that gave their TARP money back, this bank is far more prominent. The bank has also been threatened with "adverse" consequences if its chairman persists. That's politics talking, not economics.


    SO a bank wants to pay back the TARP money, with interest, and they are not going to take it.
    Last edited: Apr 5, 2009
  2. PatsFanInVa

    PatsFanInVa PatsFans.com Supporter PatsFans.com Supporter

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    Maybe, Teddy, they're "too big to fail."

    What, they didn't think that cut both ways?

    PFnV
  3. Patriot_in_NY

    Patriot_in_NY Rookie

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    Nothing more than good ole' Chicago gangland politics at work.
  4. Patters

    Patters Moderator Staff Member PatsFans.com Supporter

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    Those weren't gifts to banks. They were part of an economic recovery plan designed to give banks the resources and motivation to lend. If a banker was stupid enough to think that the Obama administration was acting in the interest of the bank, not the American people, then that banker should be let go. The TARP money was given out so that the government could have more influence over institutions key to our economic recovery. The article you posted is disingenuous at best, but the consider the source, a Fox new pundit.
  5. FreeTedWilliams

    FreeTedWilliams pfadmins PatsFans.com Supporter

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    #75 Jersey

    The banks HAD TO TAKE the money, now they see that a SOicalist is in charge and they want to pay it back WITH INTREST and the Socialist won't take it. It beginning to look alot like Venezuela around here...............
  6. FreeTedWilliams

    FreeTedWilliams pfadmins PatsFans.com Supporter

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    #75 Jersey

    Hopefully this is the real reason..

    W.H. team discloses TARP firm ties - Kenneth P. Vogel - POLITICO.com

    Lawrence Summers, a top economic adviser to President Barack Obama, pulled in more than $2.7 million in speaking fees paid by firms at the heart of the financial crisis, including Citigroup, Goldman Sachs, JPMorgan, Merrill Lynch, Bank of America Corp. and the now-defunct Lehman Brothers.

    He pulled in another $5.2 million last year from D.E. Shaw, a hedge fund for which he served as managing director from October 2006 until joining the administration.



    Obama's economic "team" has made MILLIONS from the TARP banks. Hopefully Obama is just in an illegal money grab for his cronies (Something unheard of in Chicago politics) and is not the Soicialist that we all fear that he is.

    Boy I'm gald that Obama kept that pledge of no Lobbyists....................
    Last edited: Apr 5, 2009
  7. BelichickFan

    BelichickFan B.O. = Fugazi PatsFans.com Supporter

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    #24 Jersey

    As stated before, he's like a mob boss. Once you have his money, he owns you. Obama owns them and we have seen several instances of how he's using that - he can't take the money back because then he won't own them.

    Patters, regarding your comment - refusing the money back will only hurt them "economic recovery plan" now (I used your words, I disagree) because going forward banks that need help will likely look in other directions, not wanting to be taken over by Obama the mob boss.
  8. Patters

    Patters Moderator Staff Member PatsFans.com Supporter

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    I don't think it's socialism, but then again perhaps you hadn't noticed that we still have a stock market, investors, and relatively low taxes on the wealthy. At any rate, until we restore some sensible regulations, the Obama administration will do what it can to regulate banks so that they don't f* up the economy even more than they already have.
    Last edited: Apr 5, 2009
  9. Harry Boy

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    Yeah but God what a beautiful smile he's got and Michelle's arms are the most beautiful arms in the world.
    "yes we can, yes we can, yes we can"

    The MTV crowd now have their "Poster Boy President"

    DICTATOR RISING USE CAUTION

    Maureen Dowd dreamed she was taking a shower with him.

    GOD DAMN AMERICA (his preacher said this)
  10. Patters

    Patters Moderator Staff Member PatsFans.com Supporter

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    The banks are allowed to return the money and some are doing that, but first regulators must stress test the banks to make sure they're not going to have to give them TARP money again. The TARP program was designed to serve the American people, not the banks. I for one would not have objected to letting the banks fail, but apparently a number of economists on both sides of the aisle felt that would make things even worse.

    Also, it should be noted that only a few banks have returned a few hundred million, quite a small percentage of the TARP funds.
  11. sdaniels7114

    sdaniels7114 Rookie

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    Lets say there's a building with awful wiring that catches on fire. After the fire's out can the owner of the building just give the firemen back the water to escape the post-fire investigation?


    What happened to bankers? It used to be that they didn't need laws to be damn careful about where their and their customer's money went. Now they chase every get rich scheme that comes along. Nobody wants permanent government control of the banks; but I want back the old-style grumpy bastards that made would be borrowers jump through 12 different hoops before parting with a dime and I want the government right up these current clowns' azzes until we can get those old grumpy guys back.
  12. patsfan13

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    It was also supposed to be TEMPORARY. So if this bank no longer needs the money because the crisis has passed. The Feds should take the moneyand go home.

    That is not the agenda of this gang they want control, like the National Socialist.
  13. sdaniels7114

    sdaniels7114 Rookie

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    and leave them to just stumble into another crisis? No thanks. As long as the rest of us are handcuffed to them, and economically-speaking we clearly are, I'm gonna demand some say in how they operate.
  14. PatsFanInVa

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    Excellent question, about which more in a moment.

    First, to expand on my original response, what we have in the TARP money is not simply a desire to enrich and simultaneously control bankers. It is, as Patters notes, a desire to address systemic risk with a programmatic solution.

    Now, let's look back to where the all-big-banks program came from: Yep, you guessed it, Hank Paulson, who gathered all the big banks' reps in one room, on a Sunday if I recall correctly, and pretty much said nobody leaves this room until you all accept the TARP money -- this despite the fact that many objected that their banks were just fine.

    So basically, Obama's follow-up is simply an extension of Paulson's original insistence on all systemically significant banks participating.

    I believe that, like much of what Paulson did, this was doing the right thing in spite of himself -- he had been the consumate free marketeer up to the point of allowing Lehman to go under. He didn't insist on all banks participating in TARP because he made money on the deal, or because he liked doing it. He did it because he had to do it.

    Those who scream that any government intervention in the market is Socialism, may have a point. What they ignore, however, is that the reason for government intervention was the abject failure of Capitalism, in a deregulated form.

    Now then: do any of the players -- Obama, Paulson, Bush, Geithner, etc etc -- actually espouse a command economy going forward? Do any of them claim that markets themselves are obsolete, and that government must establish penalties and rewards in every aspect of economic life? No.

    ALL, however, have stipulated behaviors that must come from the financial and auto sectors that are prerequisites to having a successful economy going forward. In other words, the days of pure capitalism are as dead as the days of revolutionary communism.

    Since that last gargantuan failure of market purism, the Great Depression, we went through a period when we understood that government has a role in the economy, followed by a period in which we decided that the government is just bad in general -- and certainly as regards any role in the economy. This is not true, and has never been true. The change we are seeing now is the recognition that markets cannot police themselves, or be policed by the largest beneficiaries of the workings of said markets, any more than chicken coops can be policed by foxes.

    Now, Sdaniels' reminiscences, which are key here:

    I've previously recounted that I had lunch around the end of last year with the head honcho in my little bit of the government. As it happened, he'd come over from a Wall Street investment house, and prior to that, he'd been at one of the biggies. So he was there in 05-06, but not 07-08.

    The one thing that stuck with me about this guy's perspective was this: He emphasized over and over that the financial sector honchos were not just rolling the dice. They were trying to be the equivalent of the grumpy old bankers. Their holy grail was to take good risks, not take bad risks, and protect themselves against the downside as best they could.

    So taking this perspective at face value: How did they get it wrong? The answer I got was that the investment banks were very much thinking like the rest of us, that "trees only grow up." In other words they got their asset valuations way wrong. But here's one place I think we are missing the boat as we all light our torches and sharpen our pitchforks:

    They thought they had protected against downside risk. In other words, all the credit default swaps and other derivatives, all the complex brain stuff they were up to, was in pursuit of that holy grail of controlled risk (which would by the way mean enrichment of themselves and their clients, so it's not like that's some sort of altruism... it's just the best way they could do their jobs.)

    Again, taking this at face value, and taking our modern bankers to be pretty good guys, what can we conclude?

    It was in large part this very pursuit of risk protected reward that resulted in the interlocking of all large lending institutions via specific kinds of "insurance policies" which were not required to be capitalized like a real insurance company. So you have all these policies to be made whole in case of catastrophic risk, which were (it turns out,) just promises.

    What we ended up with was a system where the whole goal was to protect against downside risk, but the protections themselves were written without enough capital to back them.

    So we come to the question of systemic risk. The market introduces it by simply proclaiming "caveat emptor" when it wants not to be regulated. Moral hazard comes into play -- the larger banks know that they won't be allowed to fail, because they can drag down so much with them, and, in retrospect, we can say it looks like they behaved accordingly.

    But ignoring even the problem of moral hazard, we have a problem of development of instruments that encourage purely speculative bets, because we're supposedly immune from risk.

    The erasure of lines between insurance and trade instruments seems to be a part of this problem, since it allows "insurance that's not insurance." And that's a regulatory problem.

    What we end up with is risk backed up by insurance backed up by... nothing. Or at least, not enough.

    Now here's a question that gets back to "what were those guys thinking," which is so much more satisfying than a systemic analysis anyway:

    Let's say you're in a board room and a big kahuna from one of your divisions is presenting what the heck is going on with his investments. In June 07, he shows you all a histogram of outcomes... they cluster around certain amounts of profit that form what looks like the hump of the loch ness monster. At the head of Nessie is a big profit, that happens in say 3 outcomes out of 10,000. Way over at Nessie's tail are outcomes with catastrophic failure.

    So one of the greenhorns says well, those few outcomes way over at Nessie's tail, those are disastrous. Never you mind, says the Big Kahuna. Even if those outcomes happen, we're indemnified by a bunch of CDSs and similar instruments. It won't be fun, but it won't be as bad as it looks. Mind you, at this point he is assuming we are only talking about the company's interest.

    Fast forward to say, July of 08. Same presentation, but now those outcomes have moved halfway up Nessie's back, toward the hump, on the graph presented. In other words, they are more and more likely, since a lot of underlying investments have begun to tank, and a lot of other indicators seem to say that this nightmare scenario, while not the dominant one, is perhaps a 1 in 5 chance.

    No problem, says the Big Kahuna, we're indemnified against those outcomes. The greenhorn pipes up: But isn't everybody indemnified by the same "insurance", and doesn't that come out to (quick order-of-magnitude calculation on a legal pad...) something north of 10 trillion?

    Oh, potentially 50 trillion, says the Big Kahuna. Greenhorn is horrified. But a couple of the other old hands are just smirking.

    "Kid," says one of them, "you really think that can happen? That would mean the economy becomes people trading canned goods for ball bearings to pack into shotgun shells. They won't let that happen..."

    Who's they? Well now we all know who "they" is. Us.

    So yes, we did have a problem of systemic failure. Yes, the bankers who created the conditions for said failure, thought they were insured against those conditions.

    But there was a point at which the nightmare scenario became more and more likely, there is no doubt of that. And these guys knew at that point, that the same underlying "insurance policies" applied to the entire market -- in other words, that they'd ignored systemic risk (which is in fact their fiduciary duty. They were bound to make the most money possible for their customers, and through them, for their firm.)

    In other words, they realized their risk model was broken because it could not consider risk to the entirety of the economy (and through that systemic risk, it was not capable of measuring risk to the taxpayer -- which again, given their fiduciary duty, is simply an off-the-books asset, from their firm's point of view.)

    What did they do at that point? Again, their fiduciary duty. Raising an alarm would no doubt adversely affect their books, their customers, and their firm. Making this sorry state of affairs common knowledge would take a bad outcome for all of us, and turn it into a self-fulfilling prophesy. Their firm would be the one hit first.

    So here's the thing: Who protects the taxpayer? Who controls for risk beyond the viewpoint of a single firm?

    Yep, just as you thought.

    The Gubmit could well paraphrase Jack:

    You want me on that Wall Street. You need me on that Wall Street.

    As to bailing on the bailout? Are you still big enough that your failure would guarantee a big hit to the economy at large?

    Well then we seem to have reached an impasse.

    PFnV

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