Shocked and Persuaded

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Separating Fact From Fiction

Top 6 Signs the Banks “Own the Place”

1. The banks, hedge funds, and equity firms invested in Chrysler nearly got 65 cents on the dollar for their stakes in the car company, when the same government that bailed them and their collegues out was only offering 15-22 cents ouf our money. They backed away from this claim only after President Obama called them nasty names (http://www.nytimes.com/2009/04/23/business/23chrysler.html?scp=1&sq=Treasury%20Said%20to%20Raise%20Offer%20to%20Chrysler%20Lenders&st=cse).

2. They lobbied as hard as they could to successfully remove the mortgage cram down provision from the most recent credit bill. This provision would have given judges the power to make them settle with the defaulting home owner, allowing both creditor and debtor some relief. However, as Senator Durbin these folks “…are still the most powerful lobby on Capitol Hill. And they frankly own the place.” (http://www.pbs.org/moyers/journal/05082009/watch.html)

3. Public Private Investment Program (PPIP) addressing “Toxic Assets”, which would allow banks, hedge funds, and equities to invest 7 cents on the dollar, matched by 7 cents from the taxpayer, with the remaining 85 cents coming from non-recourse loans via the FDIC. Okay these loans essentially mean that if the investments, which start off as toxic get even more toxic…Well the investors could walk away from the loan with No Recourse. Not bad!

4. Lessening by a Democrat dominated congress the Mark To Market accounting rules put in place by these same financial titans. This would allow them to put an essentially arbitrary price on their “Toxic Assets”, because to paraphrase Tim Geithner the Lapdog (http://www.nytimes.com/2009/04/27/business/27geithner.html?scp=5&sq=Gretchen%20Morgenson%20Geithner&st=cse) what we have is a confidence problem AND NOT a liquidity problem.

5. A Shadow Money Stock amounting to $9-9.5 trillion, while the actual stock is around $6 trillion. This fictional money isĀ  what the financial services industry creates to finance a boom (http://demandside.podbean.com/; http://zerohedge.blogspot.com/2009/05/chasing-shadow-of-money.html).

6. Getting 0.25% interest from the Federal Reserve, taking in money from US the taxpayer at 2% and lending out at 5-6.5%. (http://www.commondreams.org/headline/2009/05/20-3) You do the math you won’t like the results.

Category: Economics

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