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Timothy Geithner saved Wall Street, not the economy

Faster horses

Well-known member
The accolades for Timothy Geithner came on so thick and heavy in the last week that it’s necessary for those of us in the reality-based community to bring the discussion back to earth. The basic facts of the matter are very straightforward. Timothy Geithner and the bailout he helped engineer saved the Wall Street banks. He did not save the economy.

We can’t know exactly what would have happened if we did not have the TARP in October of 2008. We do know there was a major effort at the time to exaggerate the dangers to the financial system in order to pressure Congress to pass the TARP.

For example, Federal Reserve Board Chairman Ben Bernacke highlighted the claim that the commercial paper market was shutting down. Since most major companies finance their ongoing operations by issuing commercial paper, this raised the threat of a full-fledged economic collapse because even healthy companies would not be able to get the cash needed to pay their bills.

What Bernanke neglected to mention was that he personally had the ability to sustain the commercial paper market through direct lending from the Fed. He opted to go this route by announcing the creation of a Fed special lending facility to support the commercial paper market the weekend after Congress voted to approve the TARP.


It is quite likely that Bernanke could have taken whatever steps were necessary himself to keep the financial system from collapsing even without the TARP. The amount of money dispersed through the Fed was many times larger than the TARP, much of which was never even lent out. The TARP was primarily about providing political cover and saying that the government stood behind the big banks.

Of course we can never know the right counterfactual had the TARP and related Treasury efforts not been put in place, but even if we assume the worst, the idea that we would have seen a second Great Depression was always absurd on its face. The example of Argentina proves otherwise.

In December of 2001 Argentina did have a full-fledged financial collapse. In other words, all the horrible things that we feared could happen in the United States in 2008 actually did happen in Argentina. Banks shut down. People could not use their ATMs or get access to their bank accounts.

This led to a three-month period in which the economy was in free fall. It stabilized over the next three months. Then it began growing rapidly in the second half of 2002. By the middle of 2003 it had made up all the ground lost in financial crisis. Its economy continued to grow strongly until the world economic crisis brought it to a standstill in 2009.

Even if Obama’s economic team may not have been quite as competent as the folks in Argentina, they would have to be an awful lot worse to leave us with a decade of double-digit unemployment, the sort of story that would be associated with a second Great Depression. In short, the second Great Depression line was just a bogeyman used to justify the government bailout of the Wall Street banks.

As it is, the economy has already lost more than $7 trillion in output ($20,000 per person) compared with what the Congressional Budget Office projected in January of 2008. We will probably lose at least another $4 trillion before the economy gets back to anything resembling full employment. And, millions of people have seen their lives turned upside down by their inability to get jobs, being thrown out of their homes, or their parents’ inability to get a job. And this is all because of the folks in Washington’s inability to manage the economy.

But the Wall Street banks are bigger and fatter than ever. As a result of the crisis, many mergers were rushed through that might have otherwise been subject to serious regulatory scrutiny. For example, J.P. Morgan was allowed to take over Bear Stearns and Washington Mutual, two huge banks that both faced collapse in the crisis. Bank of America took over Merrill Lynch and Countrywide. By contrast, there can be little doubt that without the helping hand of Timothy Geithner, most or all of the Wall Street banks would have been sunk by their own recklessness.

There is one other hoary myth that needs to be put to rest as Timothy Geithner heads off to greener pastures. The claim that we made money on the bailout is one of those lines that should immediately discredit the teller. We made money on the loans in the same way that if the government issued mortgages at 1 percent interest it would make money, since the vast majority of the mortgages would be repaid.

The TARP money and other bailout loans were given to banks at way below market interest rates at a time when liquidity carried an enormous premium. Serious people know this, and the people who don’t are not worth listening to. It was a massive giveaway as the Congressional Oversight Panel determined at the time.

It’s impossible to know whether the economy would have bounced back more quickly and we would be closer to full employment now without the bailouts, since none of us know what other policies would have been pursued. We do know that we would have been freed of the albatross of a horribly bloated financial sector that sucks the life out of the economy and redistributes income upward to the very rich. For that fact, Timothy Geithner bears considerable responsibility.
 

hypocritexposer

Well-known member
He has surely increased regulations, to help his buddies out.

But that's what the Dems., like OT want, more regulatory capture type regulations.

The big packers should, and will, advocate for more, and expensive, regulations, that their small competitors cannot meet.

Might as well squeeze out the "small guy"

Why not make them Federal "guidelines", while you are at, so the the guys that only operate in one state have to abide by International rules, that cost more money and cut into their operating capital.

Additional Federal regulations is the way to go, for sure.


Across the Country regulations, when it comes to meat, surely means safer meat. Only the Feds. have the resources to monitor this type of thing.

Duplication, be damned....taxpayer dollars be damned.

And when the Fed. trips over their own pant legs, cause they have too many people working on a local issue, they can blame it on Bush.
 
A

Anonymous

Guest
Actually it was the opposite-- the Big Packers got the rules and regs removed- less oversight--and allowed self policing-- which led to them being able to stick all screw-ups on the little guys and running them out of business...
You need to read the history of John Munsell...

http://www.motherjones.com/politics/2003/11/meatpacking-maverick
 

Whitewing

Well-known member
Oldtimer said:
Actually it was the opposite-- the Big Packers got the rules and regs removed- less oversight--and allowed self policing-- which led to them being able to stick all screw-ups on the little guys and running them out of business...
You need to read the history of John Munsell...

http://www.motherjones.com/politics/2003/11/meatpacking-maverick

I knew you were a closet motherjoneser. Their articles are indisputible.
 
A

Anonymous

Guest
Whitewing said:
Oldtimer said:
Actually it was the opposite-- the Big Packers got the rules and regs removed- less oversight--and allowed self policing-- which led to them being able to stick all screw-ups on the little guys and running them out of business...
You need to read the history of John Munsell...

http://www.motherjones.com/politics/2003/11/meatpacking-maverick

I knew you were a closet motherjoneser. Their articles are indisputible.

Do a John Munsell google- there are 100's of articles-- some by beef and cattle magazines.... Motherjones was just the first to jump up when I googled- since you and siamese brother didn't seem to know about Munsell...
 

Whitewing

Well-known member
Oldtimer said:
Whitewing said:
Oldtimer said:
Actually it was the opposite-- the Big Packers got the rules and regs removed- less oversight--and allowed self policing-- which led to them being able to stick all screw-ups on the little guys and running them out of business...
You need to read the history of John Munsell...

http://www.motherjones.com/politics/2003/11/meatpacking-maverick

I knew you were a closet motherjoneser. Their articles are indisputible.

Do a John Munsell google- there are 100's of articles-- some by beef and cattle magazines.... Motherjones was just the first to jump up when I googled- since you and siamese brother didn't seem to know about Munsell...

Don't feel so sensitive OT about your reading habits. Really, it's okay.

And please forgive me for not keeping up with the story of John Munsell. Sounds like he got almost hounded to death by true government leadership.
 

Whitewing

Well-known member
Okay, I googled John Munsell as you suggested.

This was the first article to pop up:

http://www.foodsafetynews.com/author/jmunsell/

Liar. :lol:
 
A

Anonymous

Guest
Whitewing said:
Okay, I googled John Munsell as you suggested.

This was the first article to pop up:

http://www.foodsafetynews.com/author/jmunsell/

Liar. :lol:

I actually googled Miles City Meatpacker because I couldn't remember his name...But since you got all the articles- read them and get an idea how the big corporates run the country- and leave what trickles down to the common guy...

That Borowitz report is the best example of money influencing D.C.
 

Steve

Well-known member
read them and get an idea how the big corporates run the country- and leave what trickles down to the common guy...

when you regulate a large corporation,.. they hire a lawyer or two to deal with the nuisance.

but a small to midsize business can't and often is crushed by fines, lawsuits and ends up selling out...

MIAMI, Oklahoma -

A Miami company which makes 75 percent of the nation's portable gas containers will be closing its doors for good on July 31, 2012.

Blitz USA filed for Chapter 11 bankruptcy in November 2011, saying it was forced to make the move after a surge of lawsuits were filed against the Ottawa County company.

The closure means 117 workers will be without a job come the end of July.

Rocky Flick, President and CEO of Blitz USA, made the announcement Monday.

"This is a sad day in the 46-year history of Blitz and for our 117 employees," Rocky Flick said. "We appreciate the support of our employees and their families in our efforts to reorganize and develop a viable business plan. Unfortunately, we were not able to address the costs of the increased litigation associated with our fuel containment products."

When the company filed for bankruptcy, it had 300 employees.

Flick says they have begun efforts to market the business and its remaining assets for sale.

lawsuits from people who incorrectly used the cans..

Generally the plaintiffs sought compensation for burn injuries or deaths suffered when gasoline vapors ignited outside the gas can, traveled back to the container, and caused flashback explosions. Plaintiffs’ lawyers say a “flame arrester” shield at the mouth of the container would have prevented the problem; the company says the most serious injuries could have been avoided if consumers had not poured gasoline on fires or otherwise misused the gas cans.

Blitz USA has faced 62 lawsuits since 1994, costing $30 million in legal fees and more than $30 million in settlements and payouts, the company tells the New York Times. Of the two cases that went to trial, jurors awarded $4 million in one and found for the company in the other. The second trial wasn’t an entire loss for plaintiffs, however; in an order that is on appeal, a federal judge told the company to pay $250,000 for failing to provide all the documents on flame arresters.

He said the company decided not to add the device because of other safety issues. Among them: Consumers might mistakenly believe the device makes it safe to pour gasoline on fires.

now china makes the cans...

regulations take a similar toll...
 
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