Old And Busted: Donald Trump Wins On First Ballot. New Hotness: A Scorched Earth Convention
There is no reason why the GOP should allow Donald Trump to have the nomination no matter how many delegates he shows up with.Read More »
About a year or so ago, Secretary of
Goldman Sachs the Treasury Henry Paulson warned the country about the nature of toxic assets, those securities, valued in the trillions of dollars, that were so dragging the entire financial industry into the toilet and the country towards another economic depression, forcing the government to bail out several banks, bail out insurance giant AIG, and bail out and fully nationalize Fannie Mae and Freddie Mac (Fannie was re-nationalized). Paulson said he would initially need Congress to create an appropriations bill to spend $700 billion of money the U.S. government didn’t have to buy these toxic assets from the bank to unfreeze the frozen credit market, with the intent to sell the good assets back to the banks at a profit to the government. Remember that? Congress and President Bush passed TARP, with approving votes from Presidential candidates John McCain and Barack Obama, to require Paulson to do this in two $350 billion chunks. It turns out to have been a massive case of obfuscation since Paulson didn’t just use the TARP money to buy the small amount of toxic assets that were purchased, but to further bail out banks; eventually, two of the three American automakers. President Obama and tax cheat Treasury Secretary Geithner made further bailouts, and eventually took over GM and Chrysler.
Credit remained frozen (and still does to this day) and those toxic assets, still valued in the trillions, are still out there. Congress and President Obama passed the pork-laden unstimulating stimulus referred to as Porkulus, which will be paid for by money the government still doesn’t have and which will cost taxpayers well over about $1.2 trillion dollars after interest is added on to the original $787 billion price. That’s on top of the $700 billion (that’s before interest on the borrowed money is factored in) for TARP. What we’re seeing is nearly a replay of the “lost decade” that Japan went through during the 1990s.
Now the government is getting around to doing something with those toxic assets. Unfortunately, the amount of money Treasury is talking about spending to do this begs the question, “Who are they kidding?!?” $40 billion. That’s it. $40 billion. As far as I’m concerned, all that’s happening is that the government is continuing America’s slide into its own “lost decade”. Despite TARP, 95 banks have closed this year which is now threatening the finances of the FDIC, the government’s bank insurer; the FDIC is talking about having banks pay three years worth of premiums in order for the agency to cover the costs of all these bank closures.
The Washington Post piece I linked to also mentions that the Treasury is talking about pumping another $35 billion into state programs to expand home ownership to more people who can’t afford it, which is just another way of saying that the government is trying to refire the subprime lending business (can anyone say ACORN?). This comes at a time when the FHA is running into the same problems that befell Fannie and Freddie last year.
I’m not an economist, but it doesn’t take a genius to see that this is nuts. Toxic assets aren’t being removed from the system quickly enough, and the government doesn’t seem to have a problem with that. The banks that are too big to fail are getting bigger as smaller banks are falling by the wayside.
As far as I’m concerned, those banks that were too big to fail, along with AIG, GM, and Chrysler, should have failed. Would it have been harsh? Absolutely. Very harsh. But the garbage would have been written out of the system by now. So what’s worse? What we’re getting now is the slow bleed of a jobless non-recovery because the root cause, what to do with toxic assets, hasn’t been taken care of. And the government is doing $40 billion worth of next to nothing to clean this out, along with restarting the industry that created these toxic assets in the first place. And that’s on top of the $2 trillion (with interest) price tag for TARP and Porkulus.
I don’t know if our “lost decade” is going to last a decade. But I don’t see America being “found” again until after the majority of Congress gets voted out of office in 2010, followed by President Obama two years later.
(Hat tip: Lucianne.com)