Things weren't bad enough, what with the horrifying retail-sales obit from December, the equity market's quotidian tumbling, volcanic deficits underfoot and on the horizon, an unofficial un- and underemployment rate of about 14 percent and rising.
No, the economic gods of atonement -- who obviously remain fond of Old Testament, 'sins-of-the-father' reckonings -- must now dump this on us as well:
"An unpleasant message [is] moving through Congress and President-elect Barack Obama’s transition team: the banks need more taxpayer money."
That was yet another "Greetings and Good Morning!" lede from the New York Times in these, the waning days of the Bush administration; and just to rub it in, its purveyors gave the following its very own paragraphic home:
"In all likelihood, a lot more money."
So we're back to debating the ill-fated Troubled Asset Relief Program, whose name should have been left at, simply, Troubled Program, since its innocent youth was foolishly left to the care of the irresponsible Bushies.
You remember Igor from "Young Frankenstein," the part-time gravedigger who observed to his boss on one dark and foreboding night of terrestrial labor: "Could be worse; could be raining." It then promptly poured. And that, too, has been the short and miserable history of TARP.
The fed chairman, Ben Bernanke, officially got the added gloom rolling on Tuesday, when in a speech he "publicly made the case that one of the most unpopular and most scorned programs in Washington -- the $700 billion bailout program -- needs to pour hundreds of billions more into the very banks and financial institutions that already received federal money and caused much of the credit crisis in the first place."
Banks have already been flushed with nearly $200 billion in taxpayer cash, but that, it seems, is also not nearly enough. With the economy in free fall, banks are bracing for yet more "enormous losses as millions of consumers default on their mortgages, credit cards and automobile loans. Other losses are expected on loans made to commercial real estate developers, small businesses and for highly leveraged corporate buyout deals."
The ultimate figure? "Another $500 billion to $750 billion of [bank] losses in coming months. That could bring total losses from the credit crisis to $1.5 trillion to $1.8 trillion, twice as high as earlier estimates."
Hence so much for some (mostly progressive) rumblings about transferring TARP's balance to Obama's stimulus program. Every penny -- and probably many more of them to come -- will perforce be dedicated to the easing the credit crunch.
There is, however, one overlooked positive behind all this, and I think it's worthy of re-mention. The name "Bailout" -- as in giveaway -- got slapped on TARP in its embryonic stage and it has never shaken loose. Yet keep in mind that even though some of these funds are indeed keeping some banks alive -- temporarily, that is, bailing them out from imminent collapse -- those taxpayer funds infiltrated the credit system in the form of preferred stock, not a gift.
Therefore somewhere down Obama's eight-year road there could be a bank repurchase of stock, refilling Treasury's coffers. That, anyway, is the plan (and a well-laid one it is, right?).
Meanwhile, back at Transition Central, the incoming team is informing Congress that it'll "use a sizable chunk of the new money from the Troubled Asset Relief Program to help distressed homeowners refinance mortgages and escape foreclosure."
Bernanke, on the other hand, is "warning Mr. Obama and Congressional Democrats that most of the remaining $350 billion -- and possibly more -- has to go to shoring up banks if they are to resume lending at normal levels."
Oh how I write this with a grimace -- it damn near physically pains me -- but I've got to go with Bernanke on this one. Because it appears he is now leaning toward "reviving the original idea of TARP -- have Treasury buy up unsalable mortgage-backed securities from financial entities."
I'm not an economist, but initial and largely collective economic thinking way back when was that if lending institutions could be relieved of their hauntingly troubled assets -- perhaps through some sort of reverse-auction mechanism -- then lending might very well resume and future losses be minimized, since each lender would then know the other guy's books were back in proper and healthy order.
Remember that? Remember the original plan? Remember what Congress legislatively intended? But soon, of course, the Bush administration just kind of reworked a few things and the original plan went down the tubes.
And now, it seems, we're right back where we started.
Obama's idea of homeowner relief is laudable if not inexorable -- there's little to no doubt that something along that line will indeed be done -- but increasingly it looks as though we'll need to put the "AR" back in TARP before the credit industry's worm turns.
Buzz this on Buzzflash.net
Why preferred stock?
Wrong facts lead to wrong conclusion
The purpose of TARP is to funnel taxpayer money to the CEOs of corporations that are bankrupt but won't admit it.
Buying preferred shares in banks is a reasonable idea if done properly - as in the UK. It's a bad idea when done as in the US, where taxpayers pay several times what a bank is worth and end up owning only a tiny fraction of the bank. But P.M.'s painfully espoused idea of buying toxic assets is the worst possible idea - which is why Wall Street wants it so desperately.
I tell you what P.M.. I'll give $1 to a homeless guy so he can buy a small cup of bad coffee. I'll pay you 10¢ for an insurance policy that guarantees the homeless will repay me, and you can go to Congress for the missing 90¢ when they don't. That, on an infinitely larger scale, is what Wall Street wants taxpayers to do. The only significant difference is that instead of cheap coffee for the homeless Wall Street gave their money to their billionaire buddies for speculative investments, leveraged buyouts, soul-destroying shopping malls, and morbidly ugly tract housing.
The best solution is for the bankrupt corporations and banks to actually go bankrupt, for all those of who have committed fraud to be prosecuted, and for Congress to pass legislation outlawing (or sur-taxing) corporations that are "too big to fail".
But since Congress works for Wall Street and not for the American people, the best we can hope for is that Congress disallows the second half of the $700B TARP giveaway to bank CEOs, rejects Obama's $1T giveaway to construction company CEOs, and focuses instead on benefits that will actually help the economy such as extended unemployment benefits, health-care, and teachers.
P.S. IF YOU REMOVE THIS COMMENT AGAIN PERHAPS YOU'D CARE TO POST AN EXPLANATION.