Friday, October 28, 2011

TARP wasn't 'paid back,' not by a long shot

So it turns out that TARP loans weren't "paid back," we should be owed about $300 billion in risk premiums for the year 2009 alone, and this is not to mention the $16 trillion in Fed bailouts for the international TBTF banks. TARP was absolutely free money.

TARP wasn't really even a loan, it was a gift, it was a sick joke on U.S. taxpayers, because the bailed-out banks can pay off their TARP loans with even more government loans at zero-percent interest. (Remember how the GOP went ballistic when GM tried a similar trick to pay off some of its TARP loan?) The bailed-out banks have in turn used this borrowed money to fund their trades, which only have to earn more than 0.0% return to net them a profit. In fact, it gets worse, because often the banks have turned around and used those borrowed funds to... buy risk-free U.S. treasuries, which means they loaned their government loan money back to the government at a guaranteed higher rate of interest. But it's even worse still: the banks have been leveraging their trades, "borrowing at least $10 for every $1 of equity capital they have, to increase the size of their bets."

Stealing isn't enough vice for these sleazebags -- they have to gamble, too!

Any small-time crook of average intelligence could be explained this scam in a matter of an hour and then become a successful present-day Wall Street CEO. I mean, how could you not make stacks of cash with a scam as perfectly foolproof as this?

(Well, nearly foolproof. There is one remote pitfall: If the banks' unlimited ATM machine, the U.S. Government, is severely downgraded and defaults on its debt. Then the banks would be pretty screwed... which is why they've been giving U.S. politicians and the unwashed electorate sanctimonious lectures about the need to get our fiscal house in order, i.e. gut Social Security, Medicare, Medicaid, unemployment insurance, and government-sponsored health care, so that their scam can continue indefinitely.)

"We've got to re-think the relationship between taxpayers and financial institutions," said Prof. Ed Kane of Boston College, "Taxpayers are essentially implicit stockholders. And they're in for the worst part of the ride." The downside, that is. While the banks get all the upside -- all the profit. This is moral hazard, big time. Not to mention colossally unjust corporate socialism on a scale never before seen on Earth.

This is further evidence that the Occupy protests, despite their shortcomings like the occasional errant turd, have chosen absolutely the correct target, while erstwhile bailout opponents in the Tea Parties have, sadly, taken their eyes off the ball. The TPs now blame the attempted cure (fiscal stimulus) for the illness caused by the financial crisis and aggravated by the bank bailouts which continue to distort the real economy while denying desperately needed credit to firms and households.

Uploaded by INETeconomics
August 23, 2011 | YouTube

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