Anyone listen to This American Life on Sunday? The bank bailout.

[Javaman]

http://www.thislife.org/Radio_Episode.aspx?episode=375

(it's a free mp3 download. get it now, tomorrow it won't be)

it goes into a very simple but detailed explanation regarding the bank bailout. It's neither pro or con, just lays it all out in very simple terms.

two things struck me. Citibank and BofA roughly hold 25% of all assets in the US. The top 20 banks in the US hold 90% of them.

This in a nut shell is why we need to help them.

Prior to listening to this broadcast, I was all for letting the banks fail and allowing the market to "readjust".

Not any more.

If they fall, banks will close, peoples assets will be lost. But wait, what about FDIC? that only has 19 billion in it to cover several trillion dollars in assets.

Do the math yourself.

I hate the banks and how they screwed us, but now, my mind has been changed.

banks fail, people lose money that the FDIC can't cover. the country as a whole vanishes into the wilderness for a very very long time.

Granted, just pouring money into the banks doesn't solve the problem inherently. Regulations, ethics panels, and strict controls need to be put in force.

But allowing the banks to fail, to me, would be the certain death of this nation.

it would make the great depression look like a walk in the park.

My two cents. I highly recommend you all listen to the show.

[Warpy]

1. Thanks, I've been trying to get these points across

but it's hard to penetrate all that hatred people have for greedy bankers.

Any bailout has to be combined with enough government oversight to make the banks wish they'd been nationalized, instead. Malfeasance at the top needs to be identified and punished. Regulations need to be tightened up again and thieves need to be sent back to street corners and 3 card Monte once they get out of jail.

All of this has to be combined with regulation on salaries, tying them to multiples of the lowest salary in the company. If a CEO's salary is tied to the janitor's salary, that janitor is going to find himself doing much better. Bonuses and stock options need to go the way of all other forms of embezzlement.

However, we need to keep these institutions going if we don't want to find our country in chaos and under IMF control.

[REACTIVATED IN CT]

2. FDIC low on funds - raises premiums on banks

WASHINGTON -- Declaring the decline in its insurance fund an emergency on Friday, the board of the Federal Deposit Insurance Corp. imposed a one-time $15 billion increase in insurance premiums on the nation's 8,300 banks.

When combined with a longer-term fee increase also approved Friday, the new fees will mean that banks must pay $27 billion to replenish the insurance fund this year, nine times more than last year, a jump that immediately evoked protests and predictions that it could further curtail lending nationwide.

FDIC officials said Friday morning that such a drastic step is necessary because the insurance fund, coping with the surging number of bank failures in the last year, has dropped below a legally mandated minimum.

"It is a very tough call," the board chairwoman, Sheila Bair, said Friday, just before the 4-1 vote. "I wish there was an easy out. There is not."

http://seattlepi.nwsource.com/business/401824_fdicfees28.html

[anonymous171]

3. Why did we let them get that big?

[CountAllVotes]

4. thanks for the link

:kick: and recommend!!

[Toucano]

5. I am going to listen to the show. BUT

I have to say that all these assets are only worth what we agree they are worth.

It is a great big ponzi scheme.

All this "I'd gladly pay you Tuesday for a hamburger today," is not sustainable.

Perhaps the banks must fail in order for the true value of these assets to be restored.

[Gin]

6. I keep hearing the FED is pumping money into these banks...in

addition to what we know about...where are they getting the money?

[Javaman]

13. Now THAT is the trillion dollar question. nt

[Javaman]

12. Listen to the show first, it might change your mind. it did for me.

things are so much worse than one person could possibly imagine.

[Toucano]

7. This should be a sticky.

The program is fantastic.

Thanks for sharing it.

[LeftHander]

8. Riegle-Neal Act of 1994 made sure banks got big....

Something people don't talk about much.

This was brain child of a Keating repuke...and a Old South Democrat banker.

[Javaman]

14. couple that with the laying waste to the Glass-Steagall Act by phil gramm

and you are currently seeing the results.

The Subprime Mess and Phil Gramm: An Experiment in Deregulation

http://losangeles.injuryboard.com/miscellaneous/the-subprime-mess-and-phil-gramm-an-experiment-in-deregulation.aspx?googleid=242468

In 1933, a few years following the stock market crash, Congress passes the Glass-Steagall Act, in hopes that regulating banks will help prevent market instability, particularly amongst Wall Street banks. The purpose of the act is to separate commercial banks that focus on consumers from investment banks, which deal with speculative trading and mergers.

The Glass-Steagall Act provided the proper oversight and entity separation that would prohibit banks and other financial companies from merging into giant trusts (conflict of interests) -- giant trusts or corporations being more powerful, naturally, and having the seemingly limitless capital to lobby their corporate interests, however, with a very myopic scope (particularly when it comes to factoring in potential losses -- most banks, as seen in contemporary times, chose not to anticipate losses in the mortgage market; they presumed home prices would continue to appreciate).

In 1999, former Senator Phil Gramm (who is, incidentally, Senator John McCain's economic adviser and cochairs his presidential campaign) set out to completely gut the Glass-Steagall Act, and did so successfully, replacing most of its components with the new Gramm-Leach-Bliley Act: allowing commercial banks, investment banks, and insurers to merge (which would have violated antitrust laws under Glass-Steagall). Sen. Gramm was the driving force behind the Gramm-Leach-Bliley Act, as he had received over $4.6 million from the FIRE sector (Finance, Insurance and Real Estate donations) over the previous decade, and once the Act passed, an influx of "megamergers" took place among banks and insurance and securities companies, as if they had been eagerly awaiting the passage of Gramm's Act. Everything in between Glass-Steagall and Gramm-Leach-Bliley (i.e. Savings and Loan crisis/bust) was, in large part, the incubation period for what would take place over the nine years that would follow the passage of Gramm's Act: an experiment in deregulation.

Shortly after George W. Bush was elected president, Congress and President Clinton were trying to pass a $384 billion omnibus spending bill, and while the debates swirled around the passage of this bill, Senator Phil Gramm clandestinely slipped a 262-page amendment into the omnibus appropriations bill titled: Commodity Futures Modernization Act. It is likely that few senators read this bill, if any. The essence of the act was the deregulation of derivatives trading (financial instruments whose value changes in response to the changes in underlying variables; the main use of derivatives is to reduce risk for one party). The legislation contained a provision -- lobbied for by Enron, a major campaign contributor to Gramm -- that exempted energy trading from regulatory oversight. Basically, it gave way to the Enron debacle and ushered in the new era of unregulated securities. Interestingly enough, Gramm's wife, Wendy, had been part of the Enron board, and her salary and stock income brought in between $900,000 and $1.8 million to the Gramm household, prior to the passage of the Commodity Futures Modernization Act.

[Fireweed247]

9. How could citibank go under with the ridiculous interest they charge their customers?

I think the bailout is a huge scam, where companies like citibank moved all of their money to offshore accounts, lied about their holdings, then looted the American people. It is the only thing that makes sense. I will never believe this bailout was a good thing, it was the ultimate screwing of the American people and our growing idiocracy. They did it because they could, and they are laughing all the way to the bank in Switzerland.

[Javaman]

15. listen to the program. the issue is of basic accounting.

their assets aren't worth a dime due to massive foreclosure and bankruptcies. They don't have the capital to cover the loss.

people who put their money in their bank, is part of the same moneys that were lend to the home owners who took out the loans.

if the owners can't pay back the loan, people whose money in the banks are at risk.

when you have this basic example on a massive scale you have what we have now.

So the solutions are either bail them out with money's so they can balance their accounts and keep everyones bank accounts okay or let them fail which in turn allows peoples bank accounts to be worthless AND FDIC doesn't have enough money to cover those failed accounts.

These bank accounts are by average blue collar people and the rich as well. But in this case, letting BofA fail or Citi to fail, you throw everyone out with the bath water.

[wolfgangmo]

18. I listened to the same program.

Fail no. Nationalize yes. We are in essence purchasing these banks and are already FDICing most modest assets, so let's just take the next step and nationalize them and then we can open the books, investigate and imprison the crooks and get on with life.

[Javaman]

23. Oh yeah, I agree. and I believe like it said in the show...

that one day, we will wake up, turn on the news and, poof!, they will be nationalized.

I think now, it's the only way out.

They also cited that example from 1984, where that one bank was nationalized. It was stabilized then sold to private parties. No one lost a dime.

that needs to happen now, on a large scale.

[Hannah Bell]

24. "foreclosure and bankruptcies"

the value of the loans on the bad real estate doesn't account for the mess. they're leaving out some pieces.

edit to note toward the end they say: "the problem is 'us,' not the banksters, 'greedy though they may be,' - 'we've' been living too high on the hog".

bull-shit.

[Javaman]

25. Of course they did, they termed it as "assets",

I said foreclosures and bankruptcies.

On the "high on the hog" term, what part of the debt equals 100 percent of the GDP did you miss?

That's money owed. it has to come from some place.

And I think when he used the term "us", he wasn't referring to the average person, I think he was referring to the US as a whole. That applies to the US government, you know the one, the one that spent us off in to oblivion with two wars, the first rebate by moron* back in '02 and then the second rebate last year. Thinking that pissing away money, instead of investing into society would be a great idea.

no doubt that the whole mess was brought on by a clusterfuck circular firing squad of no one wanting to take responsibilities for their lending practices and for others not taking responsibilities for their borrowing practices. And little things like massive deregulation by the republicans and the hungry public going along with it, which just reinforced their greedy ways.

we all caused this. either by borrowing to much, lending to much or not protesting until it was way to late.

we are a sum of the parts.

[Hannah Bell]

27. during the debate over the bailouts i read several analyses of the real estate markets showing

failures there didn't account for the losses. derivatives, etc. did.

you can say the producers meant the government, etc., but that's not what they said. they said "us," & the borrowing of ordinary people isn't the cause of the crisis, no more than borrowing 100% of my income to buy a house will cause a crisis if i keep my job.

that program puts the blame on the woman defaulting on her dollhouse. no other cause is examined, nor are the reasons she defaulted. the show *appears* to explain the crisis but actually the only thing it explains is a balance sheet.

it actually excuses the "greedy bankers" & says the cause is "us" (woman/dollhouse) borrowing more than we could repay.

bs.

[Javaman]

28. Hmm, interesting.

well, I'm not going to excuse the shows producers, but given the enormity of the problem and it's mind bending complexity, I think they chose the simplest way to explain it.

And it's true, they could have spread the blame around more and touched upon the other assets at fault, but given their shows of the past, the ones on mortgages, I think they have implied as much.

But then again, unless you have listened to those other shows, one wouldn't know.

So, I think you might have something there. It was a narrow scope.

I do think, though, the second part of the show, did go into the enormity and didn't explain away the problem as it being just us vs them. That's when I think the used the "us" term and I took it as applying to all of us, everyone in the US, not just the middle and lower classes.

But that's my take.

[Hannah Bell]

29. it's not an isolated instance of the meme on npr. from dean baker:

http://prospect.org/csnc/blogs/beat_the_press

Incredibly Bad Economic Piece on NPR

NPR helped a blackmail effort, as it was accurately described by MIT economist Simon Johnson, by telling us that we will have to pay huge amounts of money to rescue the banks. While it gave Johnson a brief chance to make his case, the piece concluded by telling listeners that "the problem is us," that we had borrowed too much and therefore we have to pay the cost in the form of big taxpayer bailouts. http://www.npr.org/templates/story/story.php?storyId=101224460 (different program than "tal" but one of the same reporters)

Okay, this is wrong, wrong, and wrong. First, the excessive borrowing wasn't just shear frivolity, it was attributable to something that got very little notice from NPR at the time and unfortunately still gets very little notice from NPR: an $8 trillion housing bubble.

People borrowed against this bubble wealth because the experts that NPR and other media outlets present to the public all said that this run-up in house prices was real and would persist. Economists who warned about the housing bubble were almost completely excluded from NPR.

Because NPR and the media more generally led homeowners to believe that the run-up in house prices would persist, people acting in a way that was entirely reasonable given this view. If the price of their home had gone from $200,000 to $400,000, many homeowners opted to borrow some of this equity to take vacations, buy a car, pay for their children's education or engage in other spending. They may also have stopped contributing to retirement accounts because their home was saving for them.

The problem was not "us," the problem was the experts who run our economy were unable to see an $8 trillion housing bubble and the reporters who cover the economy largely refused to talk to any of the experts who could have pointed this out.

These reporters now want the taxpayers rather than the bankers, who profited from the bubble, to pay for this failure. This NPR piece is identified as being "Planet Money." That may be appropriate because most listeners probably would not think it belongs on Planet Earth.

[Fireweed247]

10. bailout explained

[Javaman]

17. Funny cartoon, but....

the issue at hand is exactly as it's portrayed in the cartoon. It's terrifying.

While the average citizen is footing the bill for this, the problem is not that the banks eating our money, the issue is they have to STOP lending it.

Right now the administration is trying like hell to keep the banks from lending more money. They have to hold on to it so their accounts balance.

if they lend more money, they just further compound the issue.

So, I particularly don't care for the government using our money to bail them out, BUT given the fact that most of the money bailing out the banks, isn't ours, it's borrowed, I don't see how this cartoon, really displays the truth.

We are borrowing from Peter to pay Paul, but this needs to be done.

If we don't bail out these banks, it's not just us that goes down the tubes for a very long long time, the rest of the world goes too.

And frankly, from listening to this show (you should really listen, it's free), and other things I have read today, this bail out really desperately needs to be done.

This is such deep shit, you can't even imagine.

[Toucano]

11. When it is all said and done

Someone is going to get incredibly rich over this disaster.

[Javaman]

20. So why is this different than any other time in history?

I'm very far from being middle class as defined by satistics, but that doesn't prevent me from still investing what little I have wisely.

money will always be made by those who see past the trees.

[Liberal_in_LA]

16. Just listened. Great show. n/t

[Javaman]

21. Very sobering, wasn't it? nt

[Liberal_in_LA]

26. Scary scary scary.

[Raineyb]

19. This is why these banks need to be broken up

They're too damn big and they're a menace to the country.

Pumping them up is not going to fix the economy. It's merely postponing the inevitable. Hoover tried pumping up the banks. Look where it got him.

Regards

[Javaman]

22. did you listen? check out the show

and then decide. It's still free and will be until tomorrow. It's so worth it.

It gives you such a large view on the scope of the problem.

This isn't some odd market correction, this is epic in it's scale, not just a game changer but a whole sale global society changer.

Give it a listen, it's well worth your time.

[Raineyb]

30. I did listen to it.

And a poster above is correct, it sounds like blackmail. I stand by my initial reaction, these banks are too big. We should never have allowed them to get this large. Now that they are they need to be broken up into smaller solvent banks and the taxpayer should not be footing the bill to balance the bank's balance sheets. And if the banks can't balance their balance sheets then we should nationalize them. What we should not do is bail out these banks and allow them to continue on as though nothing happened. As it is there is absolutely no incentive for these banks to behave any more responsibly than they have thus far and we'll end up with the same problem some time in the future.

Regards