FacebookTwitterGoogle+RedditEmail

Why They Call It Fall

So now it turns out that the whole Troubled Assets Relief Program (TARP) was a flop or more likely a scam. Remember Bush Treasury Secretary Henry Paulson telling us last September that credit markets had locked up, and then, after half of the $750 billion that he extorted out of Congress was handed out to Wall Street firms, new President Barack Obama justifying the spending of the second half of the money because we needed to “get the banks lending again”?

Well, now Neil Barofsky, the special inspector general for TARP, is telling us that all that money, and another more than $2 trillion in loans, accomplished nothing.  In an interview with Lagan Sebert, published in Huffington Post, Barofsky says, “We were told by Treasury that the purpose of the TARP fund was to increase lending. But we haven’t increased lending.”

Well yeah, that’s true. Just ask any ordinary working stiff. My little bank, the Harleysville National Bank here in eastern Pennsylvania, far from expanding lending, has been shutting down customer credit lines. As a bank manager told me, they were “reviewing all our equity lines” in light of declining property values (actually, property values in our area north of Philadelphia have remained pretty stable).  In general, banks across the country have been canceling credit lines, closing credit card accounts on customers deemed risky—including small businesses—and making it very hard to get a new mortgage. (They’ve also been raising all kinds of fees, ripping customers off in other ways, but that’s another story.)

And that goes for the biggest banks that got billions of dollars in taxpayer bailout funds.

Barofsky has been trying doggedly to find out whatever happened to all that money of ours that was shoveled out to the banks, and as he reports, he’s been working not just without any help from the Treasury Department, but actually against the active resistance of Treasury, which he accuses of having tried to dissuade him from even looking into it.

“My biggest surprise,” he says, “is when we announced an audit (of TARP), Treasury went out of their way to say…it would be a big waste of time.” He says Treasury officials including Treasury Secretary Tim Geithner, claimed that it would be impossible to find out where the money went, on the argument that money is “fungible”—that is to say all money is the same.  Of course this is a cynical and ridiculous assertion. If it were true, there would be no job for auditors, since all auditors do is look to find out where money went. (Imagine telling an IRS auditor that it is a waste of time auditing your books, because money is fungible!)

In any event, Barofsky has gone about his work, with or without the backing of the Obama Treasury Department, and what he found is that instead of lending out the money that they were provided with by taxpayers, the banks have been “acquiring other institutions, sitting on it, paying down credit lines,” and, of course, paying out obscene bonuses to executives.

The one thing the banks are not doing is lending.

But then, as I wrote last February, it was silly to think that by shoveling money into banks during a record recession, the banks would then lend it out.  First of all, there was the awkward reality that good companies were and still are not looking to borrow money. Rather, they are trying to pay down debt and get their balance sheets on more solid ground to survive a period of low or declining sales and earnings.  The only companies that would be trying to borrow right now would be the ones that were on the rocks, and wanted money just to stay afloat. And what banker would lend to them? And second, if the banks could make more money by investing their new cash instead of making risky loans with it, why would they lend? So most of them just used the money to invest in Treasury Bonds.

The long and the short of it is that we’ve been taken for a very big and costly ride by banks that created a huge crisis and that then got the government to bail them out of it with our money, and by two administrations, one Republican and now one Democratic, that have been submissive and willing servants of the big banks.

The big surprise to me has been Paul Volcker, who I mistakenly took to be an over-the-hill relic and Wall Street patsy.  The former Carter and Reagan-era Federal Reserve Board chairman, currently chair of President Obama’s economic advisory panel, is publicly warning that the president’s bank policies are preserving a system of giant banks that are “too big to fail,” and are risking further, even larger bailouts.

Barofsky agrees, saying that since the bailout, under Obama’s bank policies, big banks already deemed “too big to fail” have become even bigger, and he concludes, “We may be in a far more dangerous place today than we were in a year ago,” for having told certain financial companies that we will not let them fail.

Little wonder that the smart money—that would be the insiders in corporate boardrooms and executive suites—is reportedly selling shares as fast as they can be sold, with the experts reporting that insider sales of company stock are running 31:1 on the sell side. The explanation: with layoffs still running at over 500,000 a month, and nobody hiring, these executives don’t see anything in the year ahead or even longer that is likely to put the economy on a renewed growth path.

Putting these bits of news together doesn’t paint a pretty picture: We’ve got an economy that appears headed for at best a long period of stagnation and, more likely, for a second downturn, once the effect of last March’s stimulus package wears off. We’ve got a financial system that has been propped up artificially, its balance sheets soggy with underwater mortgages and worthless derivatives, and its executives holding assurances that they can count on the government bailing them out no matter what stupid or self-serving decisions they make. We’ve got an economy that is 70% based upon consumer spending, in which one in five people is unemployed or involuntarily underemployed. We’ve got a nation that hardly makes anything, at the same time that its currency is sinking like a stone, making imports increasingly expensive, And we have a stock market that has been inflated into a giant bubble, just waiting to pop.

October should be an interesting month this year.

DAVE LINDORFF is a Philadelphia-area journalist. His latest book is “The Case for Impeachment” (St. Martin’s Press, 2006). His work is available at www.thiscantbehappening.net

 

 

 

 

More articles by:

Dave Lindorff is a founding member of ThisCantBeHappening!, an online newspaper collective, and is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press).

Weekend Edition
July 20, 2018
Friday - Sunday
Paul Atwood
Peace or Armageddon: Take Your Pick
Paul Street
No Liberal Rallies Yet for the Children of Yemen
Nick Pemberton
The Bipartisan War on Central and South American Women
Jeffrey St. Clair
Roaming Charges: Are You Putin Me On?
Andrew Levine
Sovereignty: What Is It Good For? 
Brian Cloughley
The Trump/NATO Debacle and the Profit Motive
David Rosen
Trump’s Supreme Pick Escalates America’s War on Sex 
Melvin Goodman
Montenegro and the “Manchurian Candidate”
Salvador   Rangel
“These Are Not Our Kids”: The Racial Capitalism of Caging Children at the Border
Matthew Stevenson
Going Home Again to Trump’s America
Louis Proyect
Jeremy Corbyn, Bernie Sanders and the Dilemmas of the Left
Patrick Cockburn
Iraqi Protests: “Bad Government, Bad Roads, Bad Weather, Bad People”
Robert Fantina
Has It Really Come to This?
Russell Mokhiber
Kristin Lawless on the Corporate Takeover of the American Kitchen
John W. Whitehead
It’s All Fake: Reality TV That Masquerades as American Politics
Patrick Bobilin
In Your Period Piece, I Would be the Help
Ramzy Baroud
The Massacre of Inn Din: How Rohingya Are Lynched and Held Responsible
Robert Fisk
How Weapons Made in Bosnia Fueled Syria’s Bleak Civil War
Gary Leupp
Trump’s Helsinki Press Conference and Public Disgrace
Josh Hoxie
Our Missing $10 Trillion
Martha Rosenberg
Pharma “Screening” Is a Ploy to Seize More Patients
Basav Sen
Brett Kavanaugh Would be a Disaster for the Climate
David Lau
The Origins of Local AFT 4400: a Profile of Julie Olsen Edwards
Rohullah Naderi
The Elusive Pursuit of Peace by Afghanistan
Binoy Kampmark
Shaking Establishments: The Ocasio-Cortez Effect
John Laforge
18 Protesters Cut Into German Air Base to Protest US Nuclear Weapons Deployment
Christopher Brauchli
Trump and the Swedish Question
Chia-Chia Wang
Local Police Shouldn’t Collaborate With ICE
Paul Lyons
YouTube’s Content ID – A Case Study
Jill Richardson
Soon You Won’t be Able to Use Food Stamps at Farmers’ Markets, But That’s Not the Half of It
Kevin MacKay
Climate Change is Proving Worse Than We Imagined, So Why Aren’t We Confronting its Root Cause?
Thomas Knapp
Elections: More than Half of Americans Believe Fairy Tales are Real
Ralph Nader
Warner Slack—Doctor for the People Forever
Lee Ballinger
Soccer, Baseball and Immigration
Louis Yako
Celebrating the Wounds of Exile with Poetry
Ron Jacobs
Working Class Fiction—Not Just Surplus Value
Perry Hoberman
You Can’t Vote Out Fascism… You Have to Drive It From Power!
Robert Koehler
Guns and Racism, on the Rocks
Nyla Ali Khan
Kashmir: Implementation with Integrity and Will to Resolve
Justin Anderson
Elon Musk vs. the Media
Graham Peebles
A Time of Hope for Ethiopia
Kollibri terre Sonnenblume
Homophobia in the Service of Anti-Trumpism is Still Homophobic (Even When it’s the New York Times)
Martin Billheimer
Childhood, Ferocious Sleep
David Yearsley
The Glories of the Grammophone
Tom Clark
Gameplanning the Patriotic Retributive Attack on Montenegro
FacebookTwitterGoogle+RedditEmail