So several of the Big Bad Banks are going to repay their TARP funds. Hooray! And the government stands to turn a small profit -- about $5 billion -- on the whole thing so far. Double Hooray! This must mean the economic crisis is over, right?
Oh, no, it will never be over. Just days after saying the recession may be done by the end of summer, Paul Krugman wrote yesterday:
Just a quick note: is it just me, or has the economic news started to darken again? Up through about March, every report was worse than you expected, often worse than you could have imagined. Since then, most reports — although continuing to be bad in an absolute sense — have “surprised on the upside.” But my sense is that in the last few days we’ve been getting reports — Korean trade, Japanese orders, German exports — that are once again surprisingon the downside.
This thing ain’t over yet.Why? Why are people willing to invest in banks that are so troubled? Most people say it's because investors know, thanks to TARP, TALF, PPIP, etc. that the U.S. government is invested in keeping these banks standing. If they can't fail, why not invest?
I agree that's partially behind this, too, but there's a larger political issue, as well. Would TARP under President John McCain have saved the banks? I think not -- in part because McCain never seemed particularly committed to the goal of TARP. Instead, I think the recovery that's starting now -- or at least the plateau we've reached -- is due mostly to the confidence that comes when a Democratic administration -- an administration with hardly any "real" liberals, but with that funny socialist reputation -- shows a willingness to step between Wall Street and Main Street. And right there is the reason that a Democrat's administration is generally better for the economy than a conservative administration. People want the confidence that comes with a backstop; they are more willing to spend and invest when they know there's an active referee on duty.Did Barack Obama save the banks? Maybe, maybe not -- but his presence in the White House, and all of that televised whining about his socialist tendencies, hasn't hurt the recovery one bit.
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Catherine Forsythe
Writer to the Stars
Emily Holleman
Iron Skillet
Leslie Harpole
old new lefty
Salon.com
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1) they don't want anyone getting too close a look at how they account for their claimed value;
2) they don't want anyone telling them not to foreclose on millions of homeowners;
3) they don't want the government monitoring so closely whether they adhere to the constraints of the new credit cardholders' bill of rights that puts limits on random interest rate increases and retroactive interest;
4) they don't want regulators to see how they move money around within their vast organizations, from department to department...
All of this means we are likely to see millions of bankruptcies, millions of foreclosures, and several dozen more bank failures this year alone... not because Pres. Obama has not done everything right, but because intransigence, greed and short-sightedness at the top levels of bank management mean the banks still refuse to get on the right side of history to prevent a prolonged recession.
And the recovery? It's going to be a crappy summer but come August things will turn around. Personally I am banking as much cash as I can so I can buy up more damaged stocks before the real turn around starts.
McCain? He showed every bit of evidence in the election that he knew nothing about economics and would be very Hoover-ish.
Economies are about actually doing things. Everything else is gambling.
The inflationary effects of the massive stimulus that has been injected into this economy for the past 15 years - yes, you read that right; it started with Clinton (well, it really started with Reagan, but that's too ancient history for many) - have yet to come home to roost.
Assuming we'll survive beyond the end of the Mayan calendar, the 2020s do not look to be a happy time.
There would be *less* transparency in the Wall Street bailouts (if you can believe that) and the bailouts would have been bigger. There would have been massive spending cuts and the 'free market' would reign over the land. GM and Chrysler would be bankrupt and American troops would probably be in Iran and North Korea by now. I imagine that healthcare reform would be the removal of Medicaid and everyone tossed to the insurance company wolves. Most of the rest of the bill of rights would be shredded.
I guess it's hard to say but with Obama we got 'McCain light' to some extent. As for Obama lying about what he *would* do after being elected, that's just the nature of the beast. We were told what we wanted to hear. That he was going to be so 'not like Bush' that anyone would be a fool to not vote for him. Camouflage or a smokescreen, the nation fell for it. But on reflection, most of what GW Bush promised leading up to the 2000 election didn't come about either. A 'uniter not a divider'? That Karl Rove was a genius for words...
Thanks for the comments, all.
They are farming us.
The only thing that would have prevented that scenario would have been if the Democrats in Congress had suddenly developed spines. But since most of the most powerful Dems (read Chris Dodd) have substituted lobbyist cash for backbone, it would have been a feeding frenzy for banksters and an even worse disaster for the public.
And anyone who thinks this is over has rocks in their head -- or as willfully taking advantage of people's false hopes. Until jobs are restored, residential foreclosures will continue and will increase. And commercial real estate will be next because people who don't have jobs or money won't be spending, and therefore businesses will fail and commercial real estate will tank even worse than residential.
Don't blame the messenger; I've been preaching against Voodoo Economics for thirty years now. I voted for Perot in '96 because I heard two giant sucking sounds few heard -- jobs going overseas and cash being siphoned out of the treasury and ordinary peoples' savings.