Do Not Miss “Secrets and Lies of the Bailout”
Isn't it funny how citizens of the US have heard almost nothing but bland reassurances about how that whole cost-of-an-entire-war-to-bail-out-the-banks thing worked out?
Yes, well. One of our country's greatest remaining investigative journalists has some news for you…the whole thing is an amazingly good read, but here's an important taste:
…On paper, the Emergency Economic Stabilization Act of 2008 was simple: Treasury would buy $700 billion of troubled mortgages from the banks and then modify them to help struggling homeowners. Section 109 of the act, in fact, specifically empowered the Treasury secretary to "facilitate loan modifications to prevent avoidable foreclosures." With that promise on the table, wary Democrats finally approved the bailout on October 3rd, 2008. "That provision," says Barofsky, "is what got the bill passed."
But within days of passage, the Fed and the Treasury unilaterally decided to abandon the planned purchase of toxic assets in favor of direct injections of billions in cash into companies like Goldman and Citigroup. Overnight, Section 109 was unceremoniously ditched, and what was pitched as a bailout of both banks and homeowners instantly became a bank-only operation - marking the first in a long series of moves in which bailout officials either casually ignored or openly defied their own promises with regard to TARP.
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In fact, the amount of money that eventually got spent on homeowner aid now stands as a kind of grotesque joke compared to the Himalayan mountain range of cash that got moved onto the balance sheets of the big banks more or less instantly in the first months of the bailouts. At the start, $50 billion of TARP funds were earmarked for HAMP. In 2010, the size of the program was cut to $30 billion. As of November of last year, a mere $4 billion total has been spent for loan modifications and other homeowner aid.
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So what exactly did the bailout accomplish? It built a banking system that discriminates against community banks, makes Too Big to Fail banks even Too Bigger to Failier, increases risk, discourages sound business lending and punishes savings by making it even easier and more profitable to chase high-yield investments than to compete for small depositors. The bailout has also made lying on behalf of our biggest and most corrupt banks the official policy of the United States government. And if any one of those banks fails, it will cause another financial crisis, meaning we're essentially wedded to that policy for the rest of eternity - or at least until the markets call our bluff, which could happen any minute now.
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- via Secrets and Lies of the Bailout | Politics News | Rolling Stone.
Originally published at *Transcendental *Logic. You can comment here or there.