Gerhard Stoltz's Library tagged money →  View Popular

Really? Ya think the ‘revised model’ might be of dubious robustness? The real reason, one has to guess, is that only AAA securities are eligible for TALF funding. So, thanks to the new Laurel & Hardy ratings the gubment will be loaning money on highly generous terms to the same sharpies who cooked those securities up, so that said sharpies can buy them back cheaper while risking very little of their own capital. In other words, we’re backstopping them as tax paying citizens.

France is concerned about its growing trade deficit, which now stands at a record $71.4 billion. Germany wants to sustain its export-driven economy and the manufacturing base on which it is based.

The mistake most people make in looking at the financial crisis
is thinking of it in terms of money

The problem was, none of this was based on reality. "The banks
knew they were selling crap," says a London-based trader from one
of the bailed-out companies. To get AAA ratings, the CDOs relied
not on their actual underlying assets but on crazy mathematical
formulas that the banks cooked up to make the investments look
safer than they really were.

That same year, as the subprime crisis was exploding, the
Government Accountability Office criticized the OTS, noting a
"disparity between the size of the agency and the diverse firms it
oversees." Among other things, the GAO report noted that the entire
OTS had only one insurance specialist on staff — and this
despite the fact that it was the primary regulator for the world's
largest insurer!

Market analyst Eric Salzman is more blunt. "If AIG went down,"
he says, "there was a good chance Goldman would not be able to
collect." The AIG bailout, in effect, was Goldman bailing out
Goldman.

The reason the number has dropped to nothing is that the Fed had
simply stopped using relatively transparent devices like repurchase
agreements to pump its money into the hands of private companies.
By early 2009, a whole series of new government operations had been
invented to inject cash into the economy, most all of them
completely secretive and with names you've never heard of

When one considers the comparatively extensive system of
congressional checks and balances that goes into the spending of
every dollar in the budget via the normal appropriations process,
what's happening in the Fed amounts to something truly
revolutionary — a kind of shadow government with a budget
many times the size of the normal federal outlay, administered
dictatorially by one man, Fed chairman Ben Bernanke.

"There's definitely a feeling among community bankers that no
one up there cares much if they make it or not," says Tanya
Wheeless, president of the Arizona Bankers Association.

Nonetheless, the lion's share of the bailout money has gone to
the larger, so-called "systemically important" banks. "It's like
Treasury is picking winners and losers," says one state banking
official who asked not to be identified.