Let's take a step back and look at the big picture, shall we? Forgive me if you already know most of this.
PART !: THE "BIG PICTURE"
Looking at the big picture, the problem really began in the 1980s, when regulations on finance and debt were eased. You have several interlocking
trends that persisted for about a quarter century.
A) More debt on every level: Consumers spending more on credit (to the point of negative savings), companies borrowing more, banks allowed by new
regs to lend more to sketchier persons and institutions. Oh, and let7s not forget balooning federal debt under every administration, Dem or Rep.
Result: a succession of credit bubbles, from the dotcom days to real estate.
B) A merger-and-aquisition binge in all major industries that reduced the payrolls and allowed companies to book huge "paper" profits and thus
borrow more money. Meanwhile, millions of Americans swap higher-paying for lower-paying jobs...if they are lucky to get jobs at all. They are told
again and again by the press that there are "jobs Americans won't do," and this is used to justify a mass immigration wave, creating further
competition and keeping wages down. Utter nonsense. I worked as a farmboy as a teen, and when I was in college I did everything from work on a
heavy-manufacturing assembly line, door-to-door sales, fast-food gigs, and call-center work. Although none of them were as pleasant as my current gig,
I wouldn't hesitate to do any of them again if it was what I needed to do to feed my family. I'm sure millions would agree.
C) General overfinacialization of the economy as manufacturing withered; During this period, finance and financial services jumped frfom 12% to
about 25% of our economic activity
D) The development of ever more exotic financial instruments that were harder and harder for laymen to grasp, carrying tremendous short-term
benefits and horrifc long-term risks
E) A focus on shorter and shorter term thinking in every company: make quarterly results or yer fired. Totally ignore long-term strategic
PART II: TARP
Once the CDOs, CDSs, and other exotic instruments (see "D" above) finally imploded, the big banks come hat-in-hand to congress to ask for federal
assistance. They spew dire warnings, like "If we don't get this thing hammered out in the next 2 days, the American people won't be able to get
cash from their ATMs on Monday." (Yes, Hank Paulson, ex-Goldman CEO, Sec'try of Treasury, actually said this, or something very close to it).
2) Congress got scared. A 1000-page bill that nobody had time to read containg who knows what was rammed through. The basic thrust: Congress will use
$700 billion and "more if needed" to buy the toxic assets from the banks that messed up, so the banks will have actual cash again. This is TARP.
3) At the last minute, Paulson "changes his mind" and decides to use TARP money NOT to buy off toxic assets, but to actually buy stock in "troubled
banks," including many that were not troubled at all -- including, lets see, wait for it....Goldman Sachs. Of course, the scum at Citi and elsewhere
got their cut of the pie too. Congress was furious and quite simply agog. They had voted for one bill, and then, out of the blue, the recpient of the
money decides to use it for a totally different purpose than they had been told about. The rationale was some vage BS about "shoring up the system"
and "creating confidence."
It would be like if begged your dad to sell his house and move to a homeless shelter so you could get cash for life-or-death liver surgery. After he
reluctantly agrees, than instead of going to the hospital, you buy a new Ferrari.
Why did this happen? Isn't it ILLEGAL to APPROPRIATE FEDERAL FUNDS for different purposes than those for which congress originally voted? Why
doesn't congress censure these people? What about the legal system? Why aren't we seeing class-action suits, the involvement of the supreme court,
I simplify a little...but not much. When people say TARP was a "bait and switch," they are speaking LITERALLY. They told us they would use the money
for one thing, and then turn around and use it for a totally different thing.
Oh, and guess who's handing out record bonuses this year....wait for it...I'll give you a hint: the first word begins with a "G" and ends with
"OLDMAN," and it is not Gary Oldman.
Meanwhile people rant and rave about "healthcare": a problem at least 2 orders of magnitude smaller than what we have just witnessed. They didn't
even bother to hide it...all of this has been in the mainstream press (albeit buried on page 7 below a dozen Michael Jackson tributes) and CSPAN for
all to see. And thankfully we still have the net. People know something is wrong, but all their anger is getting channeled into "healthcare" and
stupid partisan sniping. Obsecenity, obsenity all.
Ever read Cormac McCarthy's masterpiece "Blood Meridian" ?
Strip away the
three-piece suits and it seems we are living back in those days again somehow. Or maybe we just never really left them.
[edit on 8/21/09 by silent thunder]