It’s amazing to me how quickly the Overton Window has moved to the right pertaining to free money for banks. Six months ago, when Ben Bernanke and Hank Paulson suggested their Free Money For Banks plan, the near universal reaction was “Say wha?” But after six months of the same idea being recirculated and repeated, Tim Geithner’s latest proposal, which is essentially the same thing that Bernanke wanted half a year ago, now people are starting to say, “That’s not as bad as it could be, I guess.”
Repetition can make anything true if you give it long enough. And even in the short term, it can make an awful idea sound not so awful after all.
And now we hear more mumbo-jumbo about frozen assets and undervalued assets. Has it not occurred to anyone that these assets are frozen because they know that Buddy Tim is eventually gonna pay more than market value for them? Why sell now when you know that you can get a higher price later? And what makes Buddy Tim so sure that the market is so wrong about the value of these assets in the first place? We’re asked to believe that a market solution is the best solution because Free Markets are always awesome, and then simultaneously believe that the markets are really wrong now so don’t trust them and let Buddy Tim set the prices on everything.
And why are the banks the big priority anyway? It should be common knowledge that banks don’t actually make anything. Banks shift paper and money around, and make a good profit at it. There’s nothing wrong with shifting paper around, or making money at it; it’s an important function in a modern society. But it’s hardly the most essential or basic function. And it’s not a function that somehow only these particular people are able to do. So why is fixing the banks the top priority? And why is it that we’re fixing the banks by giving lots of money to the exact same people who screwed up the banks in the first place?
When it came time to bailout GM (a company that actually makes something) we had to renegotiate everybody’s salary and pensions. Fair enough. They were getting a lot of public help, so asking for a few concession made sense. But now that we’re bailing out the banks, again, we once again hear about the sanctity of contracts and how the AIG countermeasures simply must be paid or else something Bad will happen. Do they think we forgot how it worked with that other company a few months ago? Contracts can always be renegotiated, and a contract is only as good as a judge says it is. I don’t understand why President Obama is acting as if the AIG contracts are the final and absolute word on everything.
But now, despite the fact that banks don’t actually make anything, and despite the fact that contracts can be renegotiated or annulled altogether, Barack’s Buddy Tim is proposing the same old plan once more time. News Flash: It still sucks. Why does President Obama love it? Read this interview with President Obama and then try to explain it to me because I don’t get it:
There are two countries who have gone through some big financial crises over the last decade or two. One was Japan, which never really acknowledged the scale and magnitude of the problems in their banking system and that resulted in what’s called “The Lost Decade.” They kept on trying to paper over the problems. The markets sort of stayed up because the Japanese government kept on pumping money in. But, eventually, nothing happened and they didn’t see any growth whatsoever.
Sweden, on the other hand, had a problem like this. They took over the banks, nationalized them, got rid of the bad assets, resold the banks and, a couple years later, they were going again. So you’d think looking at it, Sweden looks like a good model. Here’s the problem; Sweden had like five banks. [LAUGHS] We’ve got thousands of banks. You know, the scale of the U.S. economy and the capital markets are so vast and the problems in terms of managing and overseeing anything of that scale, I think, would — our assessment was that it wouldn’t make sense. And we also have different traditions in this country.
Obviously, Sweden has a different set of cultures in terms of how the government relates to markets and America’s different. And we want to retain a strong sense of that private capital fulfilling the core — core investment needs of this country.
And so, what we’ve tried to do is to apply some of the tough love that’s going to be necessary, but do it in a way that’s also recognizing we’ve got big private capital markets and ultimately that’s going to be the key to getting credit flowing again.
He understands that Japan’s solution to the same problem didn’t work. And he understands that Sweden’s solution did. And he’s decided to go with Japan’s.
Say wha? He makes the distinction of scale between the U.S. problem and the Swedish problem, which is a worthwhile distinction to make. But then he implies that the Swedish solution can’t work here because the scale is different. Oh really? Says who? And more importantly: Why will Japan’s solution, which didn’t work on their smaller scale, suddenly work on our bigger scale? He’s talking gibberish, and I don’t like it.