Volatility

October 2, 2010

The TARP is Dead! Long Live the TARP.

Filed under: Mainstream Media — Russ @ 5:02 am

 

Simon Johnson at Baseline Scenario has written some excellent pieces, in particular his great exposition of the US as banana republic in the Atlantic.
 
But lately he seems to be auditioning for an administration slot, or a Smugman-type Party-line columnist gig.
 
Thus we have this piece, “The TARP is Gone”, which is basically echoing the corporate line even as it clucks its tongue about some of the ongoing, oh so unfortunate “abuses” of the Bailout and the rackets it rescued.
 
TARP was an essential piece of a necessary evil – that is, it saved the American financial system from collapse
 
I agree with every word of this except “necessary”, except from the point of view of the finance tyrants.
 
People who are opposed to bailouts of any kind like to argue that TARP was not really necessary. Banks could have been allowed to fail and the economic fallout around the world would not have been so dramatic. 
 
I love the elitist populist-bashing condescension of “like to argue..”
 
We citizens do in fact argue that the effects of letting the system destroy itself would’ve been nothing less than economic and political liberation from history’s most insidious tyranny.
 
Indeed we should’ve not only allowed the banks to fail, but seized the opportunity to affirmatively finish the job. That’s what the people voted for in 2008.
 
Meanwhile the economic fallout on Main Street would’ve been far less vicious than the Permanent Depression we’ve condemned ourselves to with our passivity in the face of this crime. And the kleptocracy intends to compound the crime far beyond this. The Bailout is the permanent regime, “austerity” is meant to steal the last few pennies they missed with the Bailout, and from there we’re to be restored to feudal slavery.
 
Instead, we could’ve dedicated our resouces to bolstering Main Street while we finished off Wall Street. Community banks and credit unions, receiving any necessary government backstopping (far less than the Bailout would’ve sufficed), could’ve provided all necessary services. The government could also have temporarily propped up any necessary corporate paper progam directly instead of continuing to launder it through the big banks. This would have been a temporary bridge to a definancialized economy, as we quickly wound down financialization, globalization, and all corporate welfare. Then we’d wind down the government itself. We’d have achieved freedom.
 
Johnson refers to “the first draft of [the TARP’s] history”, as if this is history and not the war front of today, including the historiography.
 
As we can see with posts like this, a current propaganda weapon of the Bailout America regime is to say the TARP = the Bailout, the Bailout has ended, it was all necessary, and the most we need to do from here is undertake some “reform”.
 
But the truths are that this is permanently Bailout America for as long as we submit to its tyranny, the Bailout will and must continue in perpetuity since the banks are insolvent and their continued existence and power depend completely upon it, and there will never be reform under this kleptocracy.
 
The one and only road to freedom remains the same as it was in 2008 – break free of the finance sector’s tyranny by whatever means necessary.
 
This struggle over the “first draft of history” is one of the battlefronts. This is of course not “history”, but very much a current event. We’re discussing the present and future, not the past.
 
But calling it past history is one of the enemy’s weapons.
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30 Comments

  1. The biggest lies in modern society generally have their foundations in language. With that mind, the acronym TARP is instructive.

    Lets start with the word Troubled:

    To my mind, fraudulent and insolvent exist in a whole other category from troubled.

    Asset:

    That term implies value, but as these were, properly speaking, only assets after TARP was created, not before, there really aren’t, by definition, any assets at all.

    Relief:

    For whom? Who, but a very limited coterie were literally and figuratively relieved?

    Fund:

    This term refers to an investment company, which begs the question, who, or what is the investment company in question, and how does one invest in a non performing, not to say, non-existent asset?

    There’s no question now, for anyone who has observed honestly what has transpired since TARP (TRAP, really) began, that TARP has not benefited anything or anyone beyond those who immediately received the funds, and, of course, The Treasury which has seen the TARP “funds” recycled back into their bonds. Ah, now we know what the “investment” was in.

    Meanwhile, the general economy languishes (on its way to the morgue) as it is starved of capital -in the aforesaid T-Bonds- and in speculation in what passes for our share markets.

    Now, everyone, it seems, remotely connected to the financial world is in full expectation of more QE 2 which will be, simply speaking, more TARP. This (informed) expectation is almost certainly correct, as anything short of such action has most convinced of dire consequences should a second round of QE 2 come to pass.

    Of course the system is all falling apart anyway, but with the present mode of operation, it is much easier to tart up the dying pig and delay the inevitable dissolution into a truly excruciating experience.

    The game, as you have deduced, has always been about saving an untenable system at any cost, literally and figuratively. Instead of TARP, money could have been dispensed directly to U.S. citizens, but that would have revealed that financial intermediaries, and their parasitic model were, at best, superfluous, and more truthfully, a blood sucking parasitic menace. The emperor’s (not so new) clothes would have been revealed to everyone.

    Comment by Edwardo — October 2, 2010 @ 6:50 am

    • Ah, but QE2 improves on TARP because it requires no legislative vote, input, or pesky Barofsky and Warren types snooping around.

      (I remember that the administration wanted infinite TARP 2.0 power included in the sham finance bill, but they didn’t get that. One of the few things the banks didn’t get.

      I remember somebody interrogating Geithner asking him, “can you guarantee you won’t demand over a trillion dollars?”, and he said No.)

      That’s an excellent acronymic parse. I’ve called it “TRAP” myself. “Asset” is of course a joke, but I think “relief” is the most Orwellian term.

      BTW, I have TARP so much on the brain that this past summer when I had to write a few e-mails involving a tarp, I’m sure that at least once I spelled it “TARP”, and the guy was probably thinking, why TF is he shouting it?

      Comment by Russ — October 2, 2010 @ 11:04 am

  2. You know, you’re right, almost every piece I’ve read of Simon’s after his Atlantic article has been tame.

    That first quote seems to directly contradict his piece in the Atlantic; the theme of that piece, I would argue, was basically that the Oligarchs needed to be crushed and sanity restored. TARP was just welfare for the oligarchs, a direct transfer of money to them.

    Maybe TARP was “necessary” to crush the middle class and pave the path to one world government. I agree with you that it sounds like he is gunning for a spot in the administration, either that or he’s been bought off.

    Comment by poopyjim — October 2, 2010 @ 8:03 am

    • You can take the boy out of the IMF, but you can’t take the IMF out of the boy.

      Comment by Frank A. — October 2, 2010 @ 9:00 am

      • Well played.

        Comment by poopyjim — October 2, 2010 @ 9:03 am

    • Yeah, I don’t know. He was solid for a while: “Break up the banks.”

      But when that failed, it looks like he recomputed.

      Well, he lasted longer than Krugman, who bowed and acknowledged the New Order in the summer of 09.

      “Goldman Sachs is bad for America, but we’re stuck with them. Bow down.”

      http://www.nytimes.com/2009/07/17/opinion/17krugman.html

      Comment by Russ — October 2, 2010 @ 11:11 am

    • Yes indeed, Simon Johnson appears to have been ‘captured,’ sadly.

      Comment by RT — October 2, 2010 @ 5:04 pm

      • That’s one of his favorite terms. He prefers it to “corruption” and “crime”, although it’s a synonym.

        Comment by Russ — October 2, 2010 @ 6:00 pm

      • Re: ‘capture/captured’–What attracts an academic to such a disingenuous euphemism? It’s a term I find disgustingly placating/appeasing/apologetic. And it makes a mockery of values central to our sense of justice.

        Comment by Steven — October 2, 2010 @ 6:34 pm

      • The technical difference is supposed to be that the “captured” regulator isn’t consciously corrupt, but has instead gradually assimilated the ideology and values of the regulated sector (and come to like and identify with them personally).

        Such a distinction may sometimes have a practical know-your-enemy utility, but I don’t recognize it philosophically or morally. It’s like the difference between conscious lying and willful ignorance. Morally there is no difference.

        Comment by Russ — October 3, 2010 @ 5:42 am

  3. I used to be a regular reader of the Baseline Scenario, but ever since their book came out (which is pretty good, actually) the nature and character of the blog seems to have changed.

    The problem that I have with Johnson’s framing of the problem is that it pretends the only choices were to (1) bail out the banks or (2) let the entire economy burn. But those are the two most inefficient choices economically.

    It was crazy for the government to just throw money at the banksters without any true understanding of the depth of the money pit that needed to be filled. We still don’t know how deep the money pit goes, and I imagine we are going to see the credit markets seize up again in the next six months as the banksters reveal “new” toxic assets that they had forgotten to tell anybody about.

    It would have been crazy for the government to let it all burn, too, at least in my opinion. Too many innocent people would have been harmed, just as they were harmed during the Great Depression. One upside, though, is that the shock to the system sure wakes the people up to reality, which I think you’d like to see, Russ, and politically that may have been a more desirable outcome than allowing people to slumber on as the banksters continue with business as usual.

    What should have been done, and what should be done the next time (which is just around the corner), is an orderly liquidation of insolvent banks. This would be something like what Sweden did, where you put the banks into receivership to eliminate the threats of economic murder-suicide by venal banksters, figure out how deep the money pit actually is, and sell-off insolvent banks piece by piece to ensure no new TBTF problems.

    Unfortunately, Johnson’s backhanded compliment of TARP and his framing of the choices only legitimize what was a truly bad policy and, not, as Johnson says, a good policy with flaws.

    I love how Johnson complains that “the bankers were not even embarrased by what happened.” Embarrassed? Embarrassed?!? I could care less if they were embarrassed. Why aren’t they in jail? Why should any criminal who owns the police force be embarrassed about getting away with his crime?

    Johnson also frets about the fact that the Obama administration missed the opportunity to “change the structure and incentives of Wall Street.” Tha’s weak sauce. Some of the practices of Wall Street are so dangerous to Main Street that they should be criminalized, but no economist will ever go so far as to say that.

    Comment by Tao Jonesing — October 2, 2010 @ 11:59 am

    • I haven’t read 13 Bankers although my local library has it.

      That’s from a Summers quote?

      “Look, darlin. We got 13 male bankers here who say women don’t know a damn thing about numbers, so STFU.”

      (Meanwhile the last time I checked no library in the system has Econned, which I do want to read. At least parts of it.)

      I recall Krugman especially pushing the Swedish receivership idea.

      In retrospect I came to call that the prospective “public option” of the Bailout, in that if the political heat was too much, they’d go through the nominal motions of nationalization, but it would really be the same old Bailout by an alternative laundering route. They wouldn’t really do what the Swedes did. Nor do I think they will in the future.

      It seems that Johnson has made his peace with the Bailout. And maybe he is dreaming of some position. He’s also written some stupid encomiums to Obama lately.

      Comment by Russ — October 2, 2010 @ 4:16 pm

      • I have Econned, too. I’ve read about a third of it, and it’s a tad better than 13 Bankers.

        I’m currently reading Eric Janzen’s “The Postcatastrophe Economy,” which is shaping up to be my favorite so far because it recognizes that we need to fundamentally restructure the economy to make the FIRE sector a servant of American capitalism, not its master.

        Comment by Tao Jonesing — October 2, 2010 @ 4:52 pm

      • I’ve only read a few Janzsen pieces. If I recall correctly he coined the term “FIRE sector”.

        Comment by Russ — October 2, 2010 @ 5:52 pm

      • Actually, in his book Janzen credits Michael Hudson– a mutual favorite– for coining the term FIRE sector.

        I’m just starting on the second half of the book where Janzen lays out his alternative to the FIRE economy. First, I think his analysis of the FIRE economy is dead on, even if there is some room to differ on how everything will play out as we figure out how to replace it. Second, I’m not sure that Janzen’s alternative is robust enough to do the trick.

        Economic policy is kind of like an IQ test. The policy/test that you think works validates your prejudices. From what I see so far, Janzen’s policy prescription validates the entrepeneur that he thinks he is (and may well be). The problem is that most folks just want to work for a living and feel like they’re at least running in place, if not getting ahead.

        Unfortunately, when the only people you hang out with are as smart and motivated as you are (even if you disagree with them), you forget that most people are neither. And you forget how to celebrate that important difference. Indeed, you may be saddened or even angered by the lack of seriousness shown by people who fail to live up to your standards/expectations.

        This is always how elites fail.

        Comment by Tao Jonesing — October 3, 2010 @ 3:14 am

      • It seems to be in the nature of things that the best writers must necessarily be members of a kind of elite, even if in theory they aspire to a democratic ideal.

        That’s why most revolutionary attempts ended up just replacing one set of elites with another.

        The other day I was thinking about this parallel (one of many) between Marx and Nietzsche. Marx wrote about the worker, but conceived him as a producer seeking fulfillment through his self-owned and -directed work, and conceived his ideal society based upon this. He did not see the worker as the consumer, except derivatively. He didn’t view people as wanting to get work over with so they could get on with consumption.

        Similarly, Nietzsche wrote about art and philosophy, but wrote about them from the perspective of the artist and the thinker, and that’s the audience for whom he wrote. He didn’t write primarily for the art lover and reader of philosophy.

        So in both cases the elitism (if we can call it that), overt in N’s case and implicit in M’s, is that it’s a philosophy of, by, and for the producer, not the consumer, and it envisions a social world constructed for the self-actualization of the producer, not the comfort of the consumer.

        And that’s also how I view the world.

        By contrast, every kind of what we could call passive elitism, every trickle-down political and economic ideology – capitalism, liberalism, representative democracy, etc. – seems focused on the hedonism of the consumer. It wants to pander to passivity. (And of course none of it works the way it claims. The comfort of the consumer, as we’re now seeing, was only provisional and temporary.)

        I’m planning to write more on this, so this comment’s just a sketch.

        Comment by Russ — October 3, 2010 @ 5:59 am

  4. Modern banking, and fellow traveler financial institutions are a menace to society. Any other line is just propaganda or ignorance on display.

    Comment by Edwardo — October 2, 2010 @ 12:30 pm

  5. Whether we like it or not, that Great Depression is coming, and throwing all the money at the banks was a big waste of time. After all.. the Great Depression had its good points… it boosted solidarity between people (contrary to popular belief…).
    You might like to know that I DEMONSTRATED today. It was pretty eery, listening to all the loudspeakers going on about… well, what you rant about over here, and blaming Nicolas Sarkozy for problems that go back over 200-300 years in our civilization…
    But there are times when you just have to get out and be counted (or not counted…), regardless even of what the demonstration is about.
    Look on the bright side.. Barack Obama is not quite so fucking stupid as Brussels about austerity.
    Talk about… drowning the baby to save the bath water…
    Unbelievable.

    Comment by Debra — October 2, 2010 @ 2:49 pm

    • Where it comes to “austerity” it would be hard to beat Obama’s Bailout, health racket bailout, schools liquidation plan, lots of other things, and what he dreams of as the consummation of his career and life:

      Destroying Social Security.

      Comment by Russ — October 2, 2010 @ 4:19 pm

      • Destroying social security and medicare. We’ll hear all about this after the November elections.
        ****************************
        “Hudson’s April 2006 Harper’s cover story, “The $4.7 Trillion Pyramid: Why Social Security Won’t Be Enough to Save Wall Street,” helped defeat the Bush administration’s attempt to privatize Social Security by showing its aim of steering wage withholding into the stock market to reflate stock market prices for the benefit of insiders and speculators – and to sell to the pension funds.” excerpt from: http://en.wikipedia.org/wiki/Michael_Hudson_%28economist%29#Highlights

        Comment by SM — October 2, 2010 @ 6:57 pm

      • That’s their plan. Thanks for the link, SM.

        Comment by Russ — October 3, 2010 @ 6:02 am

  6. Michael Hudson has called out Simon Johnson in less than flattering terms. I agree with your assessment, Russ. I have bent over backwards to give Professor Johnson the benefit of the doubt (so many contradictions), but he has ‘outed’ himself in his blog as someone I can no longer treat seriously.

    http://michael-hudson.com/2010/05/trouble-in-europe-china/

    Comment by WK — October 2, 2010 @ 4:54 pm

    • Hudson always nails it.

      As for Johnson, there’s also the fact that pieces like this one are really for the NYT and just reposted at Baseline.

      Hudson I don’t expect to see in the NYT.

      Comment by Russ — October 2, 2010 @ 5:58 pm

  7. I seem to have been carried away a tad what with my “fund” breakdown. Very funny about your TARPing people in e-mails.

    Comment by Edwardo — October 2, 2010 @ 9:25 pm

    • Not carried away. You could probably turn it into a post.

      Our tarp (part of a water catchment system; it collects the rain) actually does constructive work, unlike that other capitalized one.

      Comment by Russ — October 3, 2010 @ 6:07 am

  8. Well.. since the LIBERAL ideology has reduced us to a bunch of INDIVIDUALS running around clutching our chests that have holes poked in them through which the REMAINDER of our filthy lucre is falling, all the while suspiciously eyeing our neighbor to make sure that HE doesn’t have any more in his chest than we have in ours… this folly will run its course, as other follies have run their course in history.

    Comment by Debra — October 3, 2010 @ 3:02 am

    • It’s not just liberalism. It’s the entire bourgeois ideology, of which liberalism is one strain.

      Comment by Russ — October 3, 2010 @ 6:04 am

      • MY TURN TO REMIND YOU THAT THE ENTIRE BOURGEOIS SYSTEM REPLACED FEUDALISM, by the way..
        AND.. that women under feudalism HAD A MUCH BETTER LIFE than under the bourgeoisie.
        Look it up. You MIGHT be surprised…

        Comment by debra — October 3, 2010 @ 7:15 am

    • I am propertyless and possessionless. My dignity is not for sale. I’ve got the whole world in my hand.

      Comment by tawal — October 4, 2010 @ 3:16 am

      • That’s what Diogenes said. (And Alexander said, “If I wasn’t born Alexander, then I’d want to have been born Diogenes.”)

        Debra’s describing a mentality more like that enforced as described in this piece.

        http://www.monthlyreview.org/100901toporowski.php

        Comment by Russ — October 4, 2010 @ 5:46 am


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