Read it at AlterNet
While the 99% suffered hardship, a new study shows that the Fed propped up buddies in the banking industry and a vast shadow banking system far beyond what anyone has guessed.
Bail-out Bombshell: Fed "Emergency" Bank Rescue Totaled $29 Trillion Over Three Years
J. Andrew Felkerson
11 comments:
I've been saying that I have not been able to see where this is going, maybe now I do:
Wray/Felkerson basically disagree with the Fed approach to lend to their "cronies" and let "main street" twist in the wind.
So what Wray/Felkerson advocate for, is that the Fed should have created programs that let regular people go further into debt.
Wray/Felkerson advocate for more debt peonage for regular people, not just a bunch of corrupt Wall St types.
You see what their point is, it is that the wrong people got access to the credit. And if we would just throw these people in jail, and re-staff and re-regulate the industry with "honest" people, we could all go back to borrowing from the banks at high interest rates to fund our consumption just like the peons we have been trained to be.
From Bill Black and his "Hell Doctrine" piece:
http://neweconomicperspectives.blogspot.com/2011/12/dantes-divine-comedy-banksters-edition.html
"These accounting control frauds caused greater direct financial losses than any other crime epidemic in history. They also drove the financial crisis that produced the Great Recession and cost millions of Americans their jobs."
So we can see here, that if we just could send these fraudulent operators to "Hell" (personally I prefer GITMO), and re-staff the industry with "honest" people, then all would be well and we could go back to having to borrow the balances at high interest rates we all need to be able to consume what we produce and paying ridiculously more taxes than we should be coerced into paying to our current govt.
Now I see where this is going.
matt, thats not how i took the article. isnt money a creature of the state? didnt they bail out institutions that were not onthe up and up? the gamblers? i didnt read where he had said to loan out money at high interest rates to joe sixpack.
Is Matt F's comment supposed to represent an apology for the behaviors of those who designed the current crony oligarchic schemes?
My impression has been that Wray, Felkerson, Black, Hudson, and others associated with the UMKC [and are familiar with MMT] have not claimed that only the elites should be allowed to make the rules and obfuscate the assumed privileges [frequently used to the advantage by those in control of the the "government related" Federal Reserve for the benefit of those whom they consider deserving of special privilege].
If you are interested in the reply which LR Wray has provided, check the following:
Tuesday, December 13, 2011
Bernanke’s 29 Trillion Dollar Fog of Deceit
By L. Rabble Wray
http://neweconomicperspectives.blogspot.com/2011/12/bernankes-29-trillion-dollar-fib.html#more
When full,Lake Mead, the nation's largest reservoir, holds 32 cubic km. Impressive, but not nearly as much as the Colorado R. that feeds it with a maximum flow of 8500 cubic meter per second, which over three years would be 804 cubic km.
One could talk about the stress of such a maximum flow 25x larger than the reservoir's capacity (Wray's EconoMonitor comes fairly close)or one can give the impression that the Hoover Dam is now holding back enough water to drown the desert SW (Felkerson's AlterNet article).
While the latter's sensationalism may get some attention, it is essentially a possible misinterpretation by the reader that the author should work hard to avoid. Not working to avoid such misinterpretation takes away, if not discredits, the important and correct message of the former.
We can agree or disagree with Professor Wray's methodology in determining the $29 trillion number, but the take-away for me is that it's getting attention.
I see two fundamental challenges to a discussion such as this (there's probably many more). 1) The figure is cartoonishly high, causing a dissonance among people who receive the information. This is just as true of $5 trillion as it is of $29 trillion.
2) It's a one-sided discussion. There's no engagement from the media, politicians (other than Sens. Sanders & Paul, Reps Kucinich and Paul, and maybe a few others) or mainstream economists, leaving the discussion on the perceived fringes of the political realm. There is no establishment validation that will push this into the national dialectic.
From a public relations perspective, that's what legitimizes this tactic. Engage a debate about the methodology and concede the minor point about rollovers while winning the issue. It may not go down this way, but it's worth trying - at some point, something's going to break and this will be thrust into the spotlight. It's almost inevitable.
@ salsabob
Good analogy. There are similar analogies in political economy such as oft heard Austrian/goldbug figure that the dollar has lost 98% of its value since 1913. Well, that is 98 years ago and 1% per year inflation is pretty low. There's also the the astonishing figure of government borrowing when roll-overs are included in the figure.
While I agree that the 29T is a headline grabber, it has to be quickly clarified so as not to be rejected as ludicrous. That means clearly qualifying it and explaining why it is still important as a cumulative figure including roll-overs.
The question is really one of "forbearance" for the financial system while letting Main Street swing in the wind. Anyone can see feel that there was and is something wrong here, and this puts numbers to it. That's good.
Matt.. Give Randy a bit more of the benefit of the doubt. He is essential for understanding MMT.
You kind of sound like a paranoid Austrian with your rant. Slow down.
High interest rates? Ridiculously more taxes?
What MMT is about.
Everybody that wants to produce can produce. (Job guarantee)
Taxes regulate money (currency) supply. (keeps inflation in check)
Lending creates its own reserves.
Money as debt. Money as fiat. Money as trust.
etc.
Matt, what I take away from the UMKC School's prescription is that most of the toxic debt be written down and terms arranged on the remainder that mesh with borrowers' cash flow.
Their argument for writing off toxic debt is that most of it was due to fraudulent or predatory lending, and misrepresentation wrt securitization..
Joe,
My comment was "tongue in cheek". I do not believe Profs Wray and Black think that way but my comment is EXACTLY what someone who is not in paradigm would take away from their writings here: Everyone gets their jobs back if we reform the banking system; this is false.
The only way we get output and employment back up without a major change in fiscal policy (WHICH NEITHER OF THEM MENTION OR ADVOCATE FOR HERE BTW) is by everyone going back in for loans and running the Financial Obligations Ratio back up to debt peonage levels, which looks like it is starting to happen again btw (are they happy?). That is ALL ONE CAN TAKE AWAY FROM THEIR WRITINGS HERE. Is this what they advocate?
From a public relations perspective, you stay ON MESSAGE.
This witch hunt is a departure from a consistent message of keeping a policy eye on the sectoral balances and full employment. This is a wild goose chase that Wray for whatever reason is embarking on and it diverts attention from what should be the main message.
MMT is not getting enough focused and public support from those in the academe imo.
David Walker and Peterson DO NOT MAKE THIS MISTAKE I can tell you, they know how to stay focused on their moron message.
Resp,
Matt,
Your points are valid and deserve consideration. In defense of this tactic, however, I would gently direct attention to the response from the Fed to Bloomberg's story about $7 Trillion. It seems that some of this work is beginning to hit close to the mark. I'd add that consistency in message has really not produced much in the way of engagement - it's been quite frustrating for me, actually, because I believe MMT makes so much sense.
I think there are several methods that can be used to leverage Fed reform that might lead to larger changes. Or, I could be all wet.
I think that the fundamental issue here is that the Fed acted to capitalize the financial sector both in the US and abroad, while US citizens many of whom who were and are completely innocent bystanders got caught up in events and not given aid, recourse, or even any consideration.
Is this consistent with the lender of last resort function of the Fed, or was this part and parcel of a policy of extreme and unusual forbearance that favored the interests of the few over the many?
It seems to me that there are question about whether such forbearance was even legal, let alone appropriate. As many many have observed, this was capitalism gone awry behind the veil.
Some have called it "socialism for the rich,' but the alliance of government with corporations is properly called fascism — corporate statism. Who is in charge here anyway?
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