Why the things that needed to get done didn’t get done!
You have to watch Rep. Kanjorski (D-PA) explain why and how the TARP got passed.
Rep. Kanjorski: $550 Billion Disappeared in \”Electronic Run On the Banks\”
So, all of these financial markets were supposed to be collapsing because of all of the risky mortgages, right? It seemed to me at the time that you should be able to shore up the system really well by having the govt secure mortgages that had gone into default.
No, I didn’t know how much that would cost, but keep in mind that 9 out of 10 of those defaults involved a borrower finding their monthly payments ballooning beyond their means simply because some other guys had defaulted. The bad risk had been spread around - but in other words you should be able to shore it up pretty quickly by securing only a fraction of those at risk.
Then you just have the defaulted lenders pay back the govt in the monthly payments they could still afford; the govt has plenty of time to collect on it, and can put a lien on the inflated property value for the remainder (because this plan would most likely prop up the insanely inflated home values we’d been seeing).
Bingo. Markets stabilized. Now begin regulating the kinds of transactions that caused the failure.
So, why none of this obvious stuff got done has always flummoxed me. Until now.
What actually got done - this “shoring up the equity of banks” by throwing money at them to do whatever they wanted - is pure trickle-down voodoo bullshit, and reeks to high heaven of an opportunistic money grab by the fat cats. “We were in a panic and we gave them an opportunity to do whatever they wanted,” Kanjorski admits. Well… no wonder they helped themselves! You gave them the opportunity to do whatever they wanted!
And the final explanation, that the shoring-up/trickle down approach was supposed to be “cheaper” clears up so much I had wondered…
But of! course! the Republican Congress, President, and Treasury would look for the cheapest, most ineffectual way to do it! (And of course the panicked Democrats would Roll Over.) That’s their fundamental approach to all government!
The TARP bailout is synonymous with Hurricane Katrina relief. Exact same dynamics, different government agency. A sudden, but not completely unforeseen emergency comes along, and the government-hating people running the government department that was once set up precisely to manage this kind of crisis - and used to be able to do so effectively - finds itself unable to manage the crisis effectively… preferring instead to pass the task on to private enterprise (in this case) or local govt (in Katrina’s case) and throw their hands up and say, “We did the best we could! Anything more would have looked like Communism!”
Man. Remember the days when “Federal Government” meant that you knew the job could get done?
I truly appreciate Kanjorski’s candor here. What would be nice is to see if he and the Democrats in Congress have learned anything from the TARP fallout. It’s obvious the games being played with the stimulus package are a whole new ballgame. The caller certainly gets it, and is saying what I’m saying: you have to get this money into the hands of the American people, fast. I hope they do it.
