Tuesday, November 17, 2009

Bennetts TARP Gambit

Hey look, the Tea Party influence. From unintelligent message to unintelligent legislation in less than a year. SLTrib:

A group of Republican senators, including Utah's Bob Bennett, filed a bill Tuesday to stop the Treasury Department from extending the Troubled Asset Relief Program for another 10 months.

They argue the Obama administration has used TARP for purposes far beyond what Congress intended and they want the unused money -- about $300 billion -- to go toward the national debt.

"The financial crisis has passed," said Bennett. "The usefulness of TARP is therefore over."

Bennett and five of the bill's other sponsors originally voted for the $700 billion TARP program saying they felt the country was on the verge of an economic disaster. Bennett is up for reelection in 2010 and has been criticized for that vote by Republican challengers.

This is moronic. And those who think it's a good idea are morons subscribing to the moronic. No matter how much the tea baggers hates them some spending, a bank rescue was necessary. If they banks are still in trouble, additional rescue is going to be necessary. Plenty of room for criticism at the lack of TARP oversight (something conservatives played the largest role in, ironically), or where the funds were directed, but anyone who argues we should've just let our largest banks fail displays a peculiar lack of understanding about our economy and how it functions today.

I'd wager that if those sponsoring this legislation thought for a second it had an actual chance of passage, they wouldn't submit it if their life depended on it.

But since it won't pass, and since they're all facing pressure from low-information wingnuts, they send it up to pad their conservative creds.

How is this a good thing? Shouldn't we expect useful, thoughtful, and -- most importantly -- good policy from our elected officials? The tea party influence over these GOP reps afraid to stand up and call stupid stupid is a complete waste of time.

But, then again, it's entertaining to watch them scramble, so... carry on, Tea Baggers!


  1. Do we really have to support either TBTF investment banks or the teabaggers?

    One group is waay too connected: funny how Goldman Sachs and the firms who owed them money got saved, leading to record profits and bonuses at Goldman, with essentially no positive benefits to the real economy.

    The other group is just waay too crazy: "low-information wingnuts" is a polite way to put it.

  2. For Bennett this is nothing more than his effort to atone for the sin of halping to craft TARP in the first place - I wonder how many people (of those who criticized his TARP vote) will believe his sincerity and begin supporting him again.

  3. the tea partiers don't care about actual policy and the realities of our economic systems, to them it just spending and "all spending bad, urg!" Too bad Bennett is giving them even an inch. He's a smart business man, he'd be better off giving them the finger than placating to their poorly informed world view.

  4. "For Bennett this is nothing more than his effort to atone for the sin of halping to craft TARP in the first place"

    I don't know about how much he had to do with it, from my understanding Bernanke basically arrived at congress with his 3 page bill and said pass this or the economy will crash to great depression levels sometime next week.

    Either way TARP was needed the extent of the banking crisis created by the republican lead congress was staggering.

    Bear Sterns had $14,700,000,000,000 (thats $14.7 TRILLION) in the derivatives market and about $4,300,000,000,000(thats $4.3 TRILLION) where mortgage back security's with only $396,000,000,000(thats $396 BILLION) in assets and $11,100,000,000(thats 11.1 BILLION) in liquid cash. Their leveraged asset ratio was around 35 to 1, a 3% drop in value of the derivatives market could effectively bankrupt them. But more worry some is the fact that a drop in market value past 3% would drag the rest of the market down with them, given many of the mortgage backed security's where insured by AIG the difference in loss's would be covered on the mortgage back security's of course this drags AIG's stock value down and ruins their Leveraged asset ratio, many investment banks are invested in AIG so given their existing loss's on Bear Sterns their new loss's on AIG and the fact that investment banking bought out consumer banking after the 1999 repeal of glass steagall. In order to shore up their Leverage ratio as to not go bankrupt themselves they slow down on consumer and small business lending this of course wrecks the value of midsize and small business especially retailers that depend on consumer lending. Which in turns lowers more stocks on wallstreet and further damages the Leveraged asset ratio's of the bank industry.

    Can we see the domino effect here? Removal of deposit requirements and allowing investment banking to merge with consumer banking has been an absolute disaster.

    Removal of deposit requirements created new boundless amounts of lending power that leads to exotic lending structures in the name of ridicules profits.

    And allowing consumer banking and investment banking to marge means that every burp on Wallstreet puts consumer and business lending at risk.

    Without tarp lending in this national would have stopped entirely, the retail industry, the auto industry and the home industry would have simply stopped as they are entirely dependent on lending.

    Without tarp we would have a 30-40% unemployment rate, The depression would have been worse then the great depression. It would have spread world wide given how much the rest of the globe is invested in American business's.