Click amount to donate direct to CounterPunch
  • $25
  • $50
  • $100
  • $500
  • $other
  • use PayPal
Keep CounterPunch ad free. Support our annual fund drive today!

Bailouts and the New Math


The US Treasury is drawing the line on taxpayer bailouts, depending if a particular supplicant is part of the economic web that represents “systemic risk”.

So, Citigroup is “too big to fail” today. Who can forget only a few years ago the experts judged gigantism to “disperse risk”, or, that the experts now evaluating what represents systemic risk also judged the late, great asset bubbles to be acceptable. A decade ago I worked at a division of Citigroup; it was the failure of a senior manager to adequately explain the risks inherent in mortgage backed securities that triggered my personal systemic risk about the retail side of wealth management.

I was curious about securitized debt tied to housing because the suburban landscape of Florida didn’t add up. Environmentalists have always groused about “hidden subsidies” of sprawl; the inadequate infrastructure, badly planned schools and wetlands protection. What environmentalists failed to do was extend those overt hidden subsidies to the covert ones, concealed in tranches of mortgage backed securities and insurance derivatives tied to them.

To give credit where credit is due, environmentalists can’t be necessarily faulted for failing to pick up the trail of crumbs leading from devastated ecosystems to production home builders to local and state legislatures and Congress, to the White House and Wall Street. For the most part, environmentalists have been running from one leak in the dike to another, throwing up sandbags against the force of wealth creation based on securitization.

It is now clear that the entire formula for economic growth based on the housing asset bubble depended on mispricing risk. The curtain has been pulled back from trillions earned by Wall Street and its supply chain. Our economic and environmental crises are identical twins.

The same mispricing of risk is at work in a report headed to the Florida Public Service Commission, to Florida’s Governor Charlie Crist and the Legislature on the cost of energy alternatives (“Solar power costlier for Florida than nuclear power, report finds”, The Miami Herald, Nov. 26, 2008).

A representative of the environment– Eric Draper, deputy director of Florida Audubon, is quoted by The Miami Herald saying he “wishes he had more time to read the document.” His comment suggests that complexity needs more time to unwind. The report’s conclusion: that solar is considerably more costly than new nuclear power and natural gas.

I haven’t read the report; but the notion of “complexity” defying understanding has a very familiar ring.

Figuring out the relative cost of renewables is largely a matter of assessing risk; the order of calculations at the heart of what dragged the world economy into a chasm. What financial managers did– from former Fed Chief Alan Greenspan to former Treasury Secretary Robert Rubin– was to wrap themselves and everyone around them in an invisible cloak of complexity. That is how my branch manager, eight years ago, rebuffed questions about mortgage backed securities– suggesting, ‘Don’t worry. We know how to calculate risk.’

Let’s cut to the chase: there are only two relevant questions about pricing alternative energy; first, what is the cost of not converting from fossil fuels as soon as possible, and second, what is the cost of disposing radioactive fuels from nuclear power? The answer in the first case is unlimited risk. In the second case is too expensive to calculate.

The new arithmetic of bailouts, now said to total more than $7 trillion, attempts to zero out the risk to our economy from miscalculations by Wall Street and its supply chain. When it comes to assessing future risk in energy policies, no one should embrace bad choices because the arithmetic is too hard to understand. Been there, done that.

ALAN FARAGO, who writes on the environment and politics from Coral Gables, Florida, and can be reached at





Alan Farago is president of Friends of the Everglades and can be reached at

More articles by:

2016 Fund Drive
Smart. Fierce. Uncompromised. Support CounterPunch Now!

  • cp-store
  • donate paypal

CounterPunch Magazine


October 24, 2016
John Steppling
The Unwoke: Sleepwalking into the Nightmare
Oscar Ortega
Clinton’s Troubling Silence on the Dakota Access Pipeline
Patrick Cockburn
Aleppo vs. Mosul: Media Biases
John Grant
Humanizing Our Militarized Border
Franklin Lamb
US-led Sanctions Targeting Syria Risk Adjudication as War Crimes
Paul Bentley
There Must Be Some Way Out of Here: the Silence of Dylan
Norman Pollack
Militarism: The Elephant in the Room
Patrick Bosold
Dakota Access Oil Pipeline: Invite CEO to Lunch, Go to Jail
Paul Craig Roberts
Was Russia’s Hesitation in Syria a Strategic Mistake?
Lara Gardner
Why I’m Not Voting
David Swanson
Of All the Opinions I’ve Heard on Syria
Weekend Edition
October 21, 2016
Friday - Sunday
John Wight
Hillary Clinton and the Brutal Murder of Gaddafi
Diana Johnstone
Hillary Clinton’s Strategic Ambition in a Nutshell
Jeffrey St. Clair
Roaming Charges: Trump’s Naked and Hillary’s Dead
John W. Whitehead
American Psycho: Sex, Lies and Politics Add Up to a Terrifying Election Season
Stephen Cooper
Hell on Earth in Alabama: Inside Holman Prison
Patrick Cockburn
13 Years of War: Mosul’s Frightening and Uncertain Future
Rob Urie
Name the Dangerous Candidate
Pepe Escobar
The Aleppo / Mosul Riddle
David Rosen
The War on Drugs is a Racket
Sami Siegelbaum
Once More, the Value of the Humanities
Cathy Breen
“Today Is One of the Heaviest Days of My Life”
Neve Gordon
Israel’s Boycott Hypocrisy
Mark Hand
Of Pipelines and Protest Pens: When the Press Loses Its Shield
Victor Wallis
On the Stealing of U.S. Elections
Michael Hudson
The Return of the Repressed Critique of Rentiers: Veblen in the 21st century Rentier Capitalism
Brian Cloughley
Drumbeats of Anti-Russia Confrontation From Washington to London
Howard Lisnoff
Still Licking Our Wounds and Hoping for Change
Brian Gruber
Iraq: There Is No State
Peter Lee
Trump: We Wish the Problem Was Fascism
Stanley L. Cohen
Equality and Justice for All, It Seems, But Palestinians
Steve Early
In Bay Area Refinery Town: Berniecrats & Clintonites Clash Over Rent Control
Kristine Mattis
All Solutions are Inadequate: Why It Doesn’t Matter If Politicians Mention Climate Change
Peter Linebaugh
Ron Suny and the Marxist Commune: a Note
Andre Vltchek
Sudan, Africa and the Mosaic of Horrors
Keith Binkly
The Russians Have Been Hacking Us For Years, Why Is It a Crisis Now?
Jonathan Cook
Adam Curtis: Another Manager of Perceptions
Ted Dace
The Fall
Sheldon Richman
Come and See the Anarchy Inherent in the System
Susana Hurlich
Hurricane Matthew: an Overview of the Damages in Cuba
Dave Lindorff
Screwing With and Screwing the Elderly and Disabled
Chandra Muzaffar
Cuba: Rejecting Sanctions, Sending a Message
Dennis Kucinich
War or Peace?
Joseph Natoli
Seething Anger in the Post-2016 Election Season
Jack Rasmus
Behind The 3rd US Presidential Debate—What’s Coming in 2017