Joseph Stiglitz sums up TARP 1 perfectly

21 02 2009

God this pisses me off:

On fixing financial institutions: “It is pretty clear that TARP 1 — the first $350 billion — did not work. It gets an F or F–, depending on your grading structure. What we squandered on our banks would have fixed Social Security for several generations … This is close to a zero-sum transaction. The losses are there and people are talking about moving those losses from one part of the balance sheet to another, but those losses don’t disappear from society. They are still there. Most of what’s happening is just moving things around with financial alchemy. It’s not quite zero-sum because it can be a negative sum if you don’t get it right … People talk about the greed of bankers in taking the money the government gave them and using it for bonuses, not recapitalization … Well, they were doing what their incentives told them to do … A big mistake the government has made is that it has confused its ability to make loans with its incentive to make loans.”

And another thing thats sets me off is that the way Paulson wrote TARP was that clawbacks are actually possible – Obama and Congress can go in and take back all that bonus money.  But they don’t because of politicial and societal reasons (historically in America we don’t like to take profits ex post facto – well, except for a littl institution called the IRS).  My one hope is that when they do finally nationalize these banks (and at this point with their stocks trading so low the fear of wiping out stockholders no longer – their officially wiped out) they will go back in and get that bonus money.  But I am willing to bet everything I have that won’t happen. Sometimes you need a real bastard in the White House – and Obama ain’t one.  I know there are alot of run on sentences in all that – but I’m boiling.

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