Speaking of wealth redistribution (up), here is a good compliment to Randy Wray and J. Andrew Felkerson's post on the Fed bailouts.
I find it really depressing that I have to write this. But it seems I have to write it.
Substantially all of the TARP funds advanced to banks have been paid back, with interest and sometimes even with a profit from sales of warrants. Most of the (much larger) extraordinary liquidity facilities advanced by the Fed have also been wound down without credit losses. So there really was no bailout, right? The banks took loans and paid them back.
Bullshit.
Read the rest at Interfluidity
by Steve Randy Waldman
See also
at The Huffington Post
The government's bailout of banks may cost U.S. taxpayers nearly two times more than originally estimated, according to the Congressional Budget Office.
The Troubled Asset Released Program, better known as TARP, will cost the federal government $34 billion, the CBO reported on its director's blog. That's $15 billion higher than the agency's previous estimate in March. The increase in the estimate is mostly due to a drop in the market value of the government's investments in American International Group and General Motors.
3 comments:
As I read this I was thinking that the US Treasury owns Fannie and Freddie both of which make subsidized loans to Americans to "bail them out." If we count all the loans, "rolled over" and refinanced since 2008, the amount is in the ball park of $6-7 trillion dollars, but we can't stop there, we need to count the amounts lent to banks and others at low interest rates to finance the mortgages before they were sold off to fannie and freddie, 10s of trillions in short term overnight loans -- we can't ignore those roll-overs! The upper middle class bailout has been enormous. In addition the fed purchased MBS to push down 30 yr mortgage rates to an all time low which was as close as the Fed could get to bail-out loans directly to consumers. That doesn't include Optwist, qe 2 & qe1. A few more trillion of tax payers dollars subsidizing the upper middle class. The GSE's don't seem to make money on their loan portfolios when interest rates are at this level, so congress has been bailing out the GSEs on behalf of borrowers to the tune of a couple hundred billion in subsidies. This is in addition to the mortgage tax deduction. These policies shift income and taxes from wealthy investors in MBS and in taxes from the poor to reduce taxes and interest on the upper middle class.
It is interesting to note that these subsidies go primarily to "middle class" white collar workers whom are already employed and not to the poorer blue collar workers who don't have the income and stability needed to qualify under the new "responsible" underwriting criteria for home loans.
It is also notable that this same line of preferential treatment for upper middle class white collar workers extends beyond housing bailouts to educational subsidies. For example in the race to the top program approved in the "big bailout" stimulus package. If I'm not mistaken, not a single of the poorer republican states has received one dollar of money from the multi billion dollar program. You can bet California, New York, Washington State and other upper middle class states got the funds. (Purely by coincidence, the states that voted for Obama, received all the money). The poor school districts didn't need money in the same way that the suburbs of Seattle and San Francisco and NYC did. The subsidies lavished on the politically connected never end. Its sort of funny that the largest OWS protests have been from the states where the home owners and schools received the biggest bail outs.
How is that for using inflammatory politically motivated rhetoric. It is as factually dubious and one sided as all this bunk about the 1% recieving 29 trillion of bailouts. Simply fixing the low demand/oversupply of labor raises the price of labor and reduces inequality. The sharp half true rhetoric about stealing from one another is intellectually dishonest and a syptom of the disease. Sadly this partisan rhetoric being adopted by some of the professors and bloggers compromises the integrity of the MMT model which had the advantage of being very nuetral.
TB,
There is no end to this just like your analogy shows. This 29T operation needs to be shutdown pronto.
Here's Waldeman: "Hyman Minsky famously described crisis stabilization as a two-step process: First, the state/central-bank steps in as lender of last resort to halt the panic. Then the state must underwrite a program of massive deficit spending in order to “validate” — Minsky’s word — the fragile capital structures and the “innovative” business practices that proliferate during periods of tranquility."
So we are being led to believe that "step 1" is the lender of last resort activities ... this is bullshit.
And now I think I see where Wray is coming from on this. Wray studied under Minsky so this is how he looks at it too.
What always precedes these crisis is a collapse in the fiscal deficit and for the big ones a price shock in petroluem. Misnky's hypothesis misses this. Step 1 is the government OVERTAXING and OPEC in charge. Step 2 is the crisis this inevitably causes due to the public having to over borrow to consume Step 3 is the bailout Step 4 is policy morons believing they "spent all the money" on the bailout and we then get jack shit except thru stabilizers....
We need to get back to a focus on fiscal and energy....
Resp,
"We need to get back to a focus on fiscal and energy...."
YES! YES!
Couldn't agree more.
Post a Comment