Saturday, October 25, 2008

The Foxes Guarding the Hen House

Paulson and Kashkari are the biggest con men we have going. These two chrome domes would stick a knife in your grandmother and then steal the gold from her teeth. Is it too ass-holy to note that one of these dudes surnames looks like it literally means "cash n' carry"? So yeah, I see Kaskkari as a man that walks off with the goods. What a pair!

So When Will Banks Give Loans?

It is starting to appear as if one of Treasury's key rationales for the recapitalization program — namely, that it will cause banks to start lending again — is a fig leaf, Treasury's version of the weapons of mass destruction.

In fact, Treasury wants banks to acquire each other and is using its power to inject capital to force a new and wrenching round of bank consolidation. As Mark Landler reported in The New York Times earlier this week, "the government wants not only to stabilize the industry, but also to reshape it." Now they tell us.

Indeed, Mr. Landler's story noted that Treasury would even funnel some of the bailout money to help banks buy other banks. And, in an almost unnoticed move, it recently put in place a new tax break, worth billions to the banking industry, that has only one purpose: to encourage bank mergers. As a tax expert, Robert Willens, put it: "It couldn't be clearer if they had taken out an ad."


"We share your view," Mr. Kashkari replied. "We want our banks to be lending in our communities."

Senator Dodd: "Are you insisting upon it?"

Mr. Kashkari: "We are insisting upon it in all our actions."

But they are doing no such thing. Unlike the British government, which is mandating lending requirements in return for capital injections, our government seems afraid to do anything except plead. And those pleas, in this environment, are falling on deaf ears.


Late Thursday afternoon, I caught up with Senator Dodd, and asked him what he was going to do if the loan situation didn’t improve. "All I can tell you is that we are going to have the bankers up here, probably in another couple of weeks and we are going to have a very blunt conversation," he replied.

He continued: "If it turns out that they are hoarding, you'll have a revolution on your hands. People will be so livid and furious that their tax money is going to line their pockets instead of doing the right thing. There will be hell to pay."


And this is why you don't write blank checks without significant oversight and detailed instructions as to what to do with the money. I mean, we taxpayers aren't even stakeholders in any of this. Once again we trust in the good will of free-wheeling investors and bank presidents.

Did anyone hear the guilty admission of Greenspan yesterday? He basically admitted that he is a blinkered know-nothing. Of course, this is substantially after he has profited from his supposed ignorance.