Sep 242008
 

Where did George keep the 700 billion dollars, and what was he using it for before he decided to give it to the banks?

Was this 700 billion dollars just lying in a drawer somewhere, in case it was needed?

I’d genuinely like to know.

In the course of writing on this site, I’ve laughed at Church and State, disabled people, black people, white people, straights, gays, Nazis, police incompetence, corrupt politicians and Mother Teresa.   Some people didn’t like things I said,  and told me so, but the only time I ever received direct, ad hominem insults was whenever I questioned the teachings of economics.

If you do that, you’ll hit a nerve.   I have always thought religion was nonsense, but at least, in fairness to the churches, they tend not to wrap their belief systems in a veil of spurious pseudo-science, unlike the priests of the Free Market.   Question the basis of the economic system and you’ll be poking at the deepest insecurities known to mankind.

Go on.   Try it.   Go out there and suggest that market forces don’t exist.   Suggest that the market is not amenable to scientific study and that the mathematics of finance is simply a smokescreen to legitimise what is in fact a big bucket of greedy bastards pulling the levers any way they like.

Say things like that, and you know what will happen?   People who wouldn’t know a scientific theory from a man-eating crocodile will attack you for daring to doubt.

Very well then.   Let’s just examine the details of the proposed bank bail-out.

Over there in the States, and on this side of the pond as well, some bankers have been making stupid decisions, and others have been doing things that are downright criminal.   Not only have they been lending money to people who will never pay it back, but they’ve also been accepting valueless property as collateral.  That was stupid.   Other bankers have been using those loans to generate new money by overstating the value of the properties and understating the poverty of the borrowers.   That was criminal.

To get the banks out of the hole they dug, Dubya now wants to buy this big pile of shit debt, using public money, but not everyone is convinced, which is hardly surprising.

To put this figure in context, Dubya wants each man, woman and child in the united States to give the banks $23,000 dollars.   This includes every last homeless person, newborn baby and cripple.

You see, the figure of 700 billion dollars is based on the book value of the properties when the banks handed out the loans, but those houses are now worth far less than that.   In other words, the banks haven’t adjusted their books to take account of the loss.   They want George to give them the money they recklessly handed out before the pyramid scheme collapsed.

The banks don’t want to face the consequences of their stupidity and greed, and George is inclined to help them out.   He’s going to buy the worthless properties from the banks for the original full inflated price, which is plain insanity, leavened with a good sprinkling of corruption.

It makes no sense.

Look, there are only two choices:

First, governments can buy the loans at whatever they’re currently worth, which is approximately nothing.   Then the banks can go back to basics, halt the bonuses to their top executives, pause their shareholders’ dividends, drop their interest rates and start earning money to cover their losses, just as you or I would have to do if we screwed up a business venture.

Result: the sky doesn’t fall in.

Second, governments can buy the loans at their original price and the banks can walk away from the mess they’ve created with no consequences for their crooked and incompetent executives.

Result: the sky doesn’t fall in either, but the taxpayer gets massively screwed, the exchequer is weakened for years and orthodox economic policy is discredited forever.

Now, if I was a banker, I know which option I’d prefer, but what baffles me is this: why would any ordinary member of the public choose the second option?

But going back to my original question: the money that George wants to give the banks in return for worthless pieces of paper.  Where did all this cash come from?

Is the reality even more bizarre than we thought, and is George simply trading play money for play houses?

_______________

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Robert Preston

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  22 Responses to “United States Treasury Buys Banks’ Bad Debts”

Comments (22)
  1.  

    George’s legacy is nearly complete now, he has gone from failing at the oil business, to leaving the state of Texas in a financial shambles to bankrupting an entire country. While we know there is no 800 billion dollars just laying around and the treasury will just have to print some more money, I find it interesting that apparently this 3 page bail-out plan has been in the works for quite some time and was just dropped in front of the public on a Friday hoping to get it rubberstamped on a Monday. I guess it’s too bad that things came to a head in the markets so close to the election and they had to finally admit things are not going quite as well as they had been pretending they were.

    The question I have not heard asked of any of the experts is, “Just exactly what would happen if nothing was done to save the bankers?”

    Higher interest rates?
    Higher unemployment?
    Inflation?
    Increased disparity in wealth?

    We got all that now. For free. Why pay 800 billion for something you can get for free?

    They got any need for 54 year old carpenter/construction company vice-presidents near you Bock? I’m seriously looking at other places to move to and start over, and a Republican stealing yet another election will probably be the deciding factor.

    Sorry for going on, I’m kinda perturbed about things here.

  2.  

    That’s just the thing:

    He doesn’t have it.

    Someone will have to raise it, either through raising taxes on us peasants, or by cutting federal spend. Guess who loses?

    To which I say: Fuck those assholes. The men who ran AIG and Fannie Mae and Freddie Mac deserve to go to prison, and deserve to have to pay back some of the salaries they received.

  3.  

    Errrr, Iraq?

    Sure it’s all imaginary anyway.

  4.  

    Over the past few years in China:
    The former deputy chief of the finance department of Air China was executed on embezzlement charges. Yang Ning was convicted of stealing more than 26 million yuan (dlrs 3.1 million), said an official of China’s Supreme People’s Court. A Bank of China manager was executed for fraud. Liang Shihan, a manager at a branch of the bank in Zhuhai in southern China, was convicted of cheating the bank out of 6 million pounds.

    And in March this year: Only “extremely vile criminals” were executed in China last year, the
    country’s most senior judge declared.

  5.  

    @ Mr Terwilliger

    Instead of having them sew postbags they could have the perps print all 800 billion on a handpress.

    That would be some RSI at the end of the day.

  6.  

    The thing that never seems to happen is governments telling mortgagees that since the institution that lent to them has gone bust they now own their houses outright. That is, I suppose, because debt (the loan book) is an asset.

    On the other hand, if you can’t pay your mortgage, the full legal, judicial, and statutory apparatus of the State exists to facilitate repossession of property by the lending institution.

  7.  

    Exactly so, Conan.

    If you fuck up, the banks will kick you out.

    If the banks fuck up, the government will bail them out.

  8.  

    And if the loans were written off and, say, the owners then wanted to borrow to build an extension or to renovate, then the actual value of the property would be established by the collateral value given it by the new lending institution. Which seems remarkably sane, to me.

  9.  

    Found this useful in explaining what successive showers of these thieving bastards have created down through the centuries.

    “Money as Debt” (in 5 parts btw)

  10.  

    And so, in my State of the … my State of the Union … or state … my speech to the nation, whatever you want to call it, speech to the nation … I asked Americans to give 4.000 years … 4.000 hours over the next … the rest of your life … of service to America. That’s what I asked … 4.000 hours.
    [the most intelligently designed leader, most gifted orator, wisest economist* and mightiest mathematical wizard in this and all other galaxies, known or not known, on April 9th, 2002 in Bridgeport, Connecticut]

    2.260 days later, i.e. today:
    – Err, what was your speech about, Mr. President?
    – ‘t was about 4.000 years, stupid!

    * If the terriers and bariffs are torn down, this economy will grow. [Rochester, New York, January 7th, 2000]

  11.  

    As has been said before and far more elloquently than i,there is no economy.
    If they want to find €5,000,000 they’ll just type it into the computer and there it is.
    I believe the reason they make the financial systems so complicated is to keep you and i in the dark about the fact that they could wipe off all the negative balances in an instant.they could wipe all the mortgages off if they wanted to.start again,but they dont because it keeps these pricks in a job and keeps the elites wealth intact..
    keeps joe bloggs working away in fear and ignorance,easier to tell people that are in fear of their jobs to vote this way or that way,invade a country,give away a gas field for free,let a criminal politician free… etc
    rant over..

  12.  

    Makes perfect sense in a Zimbwabian way, Bock. Just get printing them George Washington’s, loads of them, tons of billions of them. Merikans, get ready to pay $250,000 for your morning coffee and bagel and $500,000 for lunch.

  13.  

    Well that’s my point. They don’t print the stuff anymore. They just say it exists and there it is. Conjured up out of thin air, with every single person in the US owing $30,000 to the banks and getting nothing in return.

    So there’s the answer to my question.

    What is money?

    Money is debt.

  14.  

    Bock, your post seems to have grown longer since i posted my rant above, but i think you’ve explained it succinctly. It IS play money for play houses. Banks for years have been telling people that their house was an investment, people started thinking of their houses that way instead of thinking of them as their homes.

  15.  

    You’re right. It did grow a bit.

    Goddamn post inflation!

  16.  

    Where did George keep the 700 billion dollars?

    ..why that’s easy to answer.

    He had it hidden in the same place that Saddam kept his WMD.

  17.  

    @ Bollix

    In that case, an enema should reveal all.

  18.  

    Benny –

    While I’m at it….why don’t I just shit the next tax increase that will be in place in 2009, because that’s the only way I’ll be able to pay for it?

  19.  

    Eliza —

    Add up the figures.

    I hope you have 23 thousand for each person in your household,because that’s what it’s going to cost you.

    That’s provided every homeless person in America and every unemployed person and every newborn baby also pay their 23k each.

    If not, I’m afraid you’ll have to find a little bit more.

    God bless the free market, and God bless GW Bush.

  20.  

    He is a fucking twat who obviously drank his way through his much lauded education, and whose father bought him the highest post in the land, and whose only redeeming quality is his wife (who seems rather nice).

    But seriously, in a way I’m glad this has come about, even if it may bring about my own financial ruin (if my company can’t sell us, they may just close us, and the job market in my city doesn’t look pretty. If I can’t find a job, and can’t pay my bills, I will probably have to contemplate bankruptcy. This is not a pleasant thought. However, my company has already done two layoffs, and I am aware of prior employees who are still out of work a year later. It makes one concerned). If ruining the economy makes the rest of America wake up to the utter disaster that is inhabiting the White House, then SO BE IT.

  21.  

    Maybe the answer is to start another war.

  22.  

    I love a good media inspired war, all those journos in flak jackets and that infantile war-speak so beloved of American generals.
    May I suggest Co. Mayo, Ireland…..All that lovely natural gas offshore, well since FF/FG et al are fucking it up for us poor tax-payers why not spread some rumours about, WMD left over since before the Good Friday Agreement, there must be some somewhere rusting away.

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