Cui Bono #1:
Talking Points Memo was going over something that I’ve been wondering - just exactly who is benefiting from the continued un-nationalization of the big zombie banks like Citibank and Bank of America? Why is there still a stop on this?
Stockholders have already lost most of their equity. Most depositors are covered by the FDIC. But the bank’s creditors / bondholders are still out there. And because of the complex house of cards of complex debt instruments that nobody really understands, the problem seems to be that nobody has the first real idea how much of that debt held is essentially bogus crapola, any more than they know if any other set of debts and bonds is crapola, because it’s all too muggled around and not even the hotshots know which is what. They knew people were willing to buy up debt instruments, but not what the hell was in them and if the paper was any count. That wasn’t their concern.
At the same time, there’s so much out there that nobody knows all of the people it’s owed to. Could be wild speculators, could be your dad’s pension fund, could be other big financial outfits here and overseas. (Same thing with AIG; much of that money going out of that seems to be shoring up overseas banks. If the debts-receivable assets of these banks suddenly goes south, so do the banks.)
In other words, the whole mess is so convoluted that they’re not really sure what to do or where to start.
Another facet is that the banks got so busy with their big ones eating up little ones parade to create Supah Mastah of Tha Universe Banks that there’s merry hell in the details; who actually would take them over (the FDIC isn’t big enough) and what about the multinationals (some countries don’t like the idea of their Big National Bank that was bought up by BankKo now becoming owned by the US government, and local laws prohibit this) (also note that deposits held in banks outside the US owned by BankKo aren’t covered by the FDIC and those overseas depositors would lose their shirts - $750 billion worth in the case of Citibank, along with all the bonds owned by the Chinese, Arab sheikhs and so on.)
The question is: why did we let this whole big-ones-eat-little-ones things get so out of control, so that this all (and I include the whole weird-debt crap) got to utterly unimaginable levels? Because the big guys were making big bucks, and were paying out big resources to keep it all rolling along through lobbyists and campaign contributions.