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That Unpopular Bank Bailout? Geithner Wants to Extend It
WASHINGTON - A day ahead of testimony in which he's sure to be grilled about the controversial taxpayer-funded bank bailout program, Treasury Secretary Timothy Geithner announced Wednesday that he wants to extend it into late 2010.
With protestors in the background, Treasury Secretary Timothy Geithner testifies on Capitol Hill in Washington, in this Sept. 10,2009 file photo, before the Congressional Oversight Panel hearing the financial markets. (AP Photo/Susan Walsh, File)
"History suggests that exiting prematurely from policies designed to
contain a financial crisis can significantly prolong an economic
downturn," Geithner wrote in a letter Wednesday to House Speaker Nancy
Pelosi, D-Calif.
The Troubled Asset Relief Program, widely known as TARP, will continue until October 3, 2010, Geithner said, arguing for prudence in keeping an unpopular program afloat until almost the end of next year.
"We must not waver in our resolve to ensure the stability of the financial system and to support the nascent recovery that the administration and Congress have worked so hard to achieve," he said.
The letter included an exit strategy for getting out of the $700 billion TARP, which passed during the Bush administration and is widely credited by economists for stabilizing a global banking system on the verge of collapse.
Instead of exiting the TARP, Geithner said its unused balance could still be used to support foreclosure prevention, to bolster the ability of community banks to lend to small businesses and to help efforts to restore activity in secondary bond markets where loans are pooled together and packaged for sale to investors.
If economists think the TARP was successful in easing the financial crisis, Americans found the idea of using taxpayer money to rescue Wall Street downright offensive. It's why Democrats and Republicans alike want the TARP to end. Banks, too, want the program to end, with Bank of America and J.P. Morgan Chase repaying their TARP funds and Wells Fargo and Citigroup desperately trying to do the same to avoid the stigma of government support.
Geithner is expected to get an earful when he testifies Thursday, for the third time this year, in front of the Congressional Oversight Panel, created when Congress passed the TARP to be a watchdog for the rescue effort. That panel on Wednesday issued a 181-page report on what the TARP has and hasn't achieved.
"The evolving nature of the TARP, as well as Treasury's failure to articulate clear goals or to provide specific measures of success for the program, make it hard to reach an overall evaluation," the report said.
In a teleconference with reporters, panel chairwoman Elizabeth Warren said the TARP was effective in stopping a spreading panic in financial markets. However, she said, the TARP also was supposed to support the broader economic recovery by stemming foreclosures and boosting lending to consumers, and in those aspects it's fallen far short.
"Step one was to stabilize the economy, and that has been accomplished and we give the Treasury very high marks for that," Warren said. "But there was a very important step two behind that. The TARP program was not authorized for the sole purpose of bailing out large financial institutions. Congress specifically states in the legislation that it expects that the benefits will be felt in getting ahead of the foreclosure crisis and in dealing with the larger economy."
Of the $700 billion authorized for TARP in late 2008, the Treasury Department now expects to deploy just $550 billion. It also expects up to $175 billion in TARP repayments by the end of next year, and this week Treasury announced it expects the TARP will cost taxpayers $200 billion less than anticipated.
Pelosi, with the support of President Barack Obama, is now looking to divert some of those TARP "savings" into job creation efforts with the nation's unemployment rate at 10 percent and projected to rise into next year. Obama has conditioned his support on using some of those TARP "savings" into deficit reduction, while congressional Republicans would like to see if all of it used to knock down the deficits.
The CBO estimates the deficit will reach $1.4 trillion this year, roughly the same as last year, and add to a total national debt that now tops $12 trillion. The CBO also sees huge deficits ahead.
Critics of TARP point to elements of the bailout plan that aren't designed for the banking system, namely the $50 billion slated to help slow a rising tide of foreclosures. The oversight panel's report Wednesday offered scathing criticism of Obama's Making Home Affordable effort.
The TARP funds designated for foreclosure mitigation efforts were supposed to be used to repay mortgage servicers, who collect mortgage payments on behalf of investors who own pools of U.S. mortgages. In exchange for modifying a mortgage, services were to be paid as an incentive for them to do right by borrowers.
Some 79 servicers, representing 85 percent of the mortgages not held by government housing entities such as Fannie Mae and Freddie Mac, have entered into contracts with the Treasury Department. Through the end of October, however, only 10 of these servicers have actually made permanent loan modifications and been reimbursed.
That's a dismal number considering that Treasury expected 50 percent to 75 percent of trial mortgage modifications to move to a permanent solution. Through October's end, there'd been only 10,187 permanent modifications. That's a conversion rate of 4.69 percent of the trial modifications under way.
"This program is not working to stem the foreclosure crisis," Warren told McClatchy. "Treasury's best estimate is that this program will deal with 3-4 million foreclosures. But current predictions put at us 8-to-13-million foreclosures, so even if every assumption Treasury made was true, if every best-case scenario occurred, we'd be dealing with about a third of projected foreclosures."
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Show AllWith the Obama Regime enabling too-big-to-fail banks to keep growing larger, while the financial industry is no more regulated today than it was one year ago, a financial meltdown bigger than the Sept. 2008 event is inevitable. Geithner wants to make sure his Wall Street cronies' wealth accumulation does not miss a beat when the meltdown occurs.
Did you hear Obama last week telling Congress to make sure that any financial regulation they propose not impact the industry?
Something should be extended alright, but it isn't the banksters bailout scheme. What should be extended has to do with Geithner and banksters, but it also has to do with neckties and parties.
I can't read the article because I can't stand looking at the picture of this motherfucker. This slimy little prick belongs in jail. Put Little Tim in a cell with Bubba the fudge packer and throw away the key.When Bubba's done with him throw that ugly fuck Summers in. Please stop running pictures of these criminals. It's screwing up my blood pressure.
Hounddog4, come on man tell us how you really feel and no holding back now! :-)
What you said is how I feel about so many in our government. What is going on in this country is now completely disgusting!
Let me add a third to ya'll's very valid feelings. I'm on two different blood pressure meds. and it continues to rise unchecked, just as the corruption within the government does. That half of our elected officials haven't already been drawn and quartered with the leftovers fed to the dogs by huge torch carrying mobs blows my mind. I just keep wondering what the new map of what used to be the U.S. is going to look like.
Maybe progressives can form their own nation!
Now that is a good idea! First law on the books: It shall be a capital crime to make any attempt to influence any elected official or any official appointed by an elected official through the use of personal or political finiancial contributions or gifts.
Jeez! I was feeling proud of how well I restrained myself.
Hall sez: "Geithner said (TARP's) unused balance could still be used to support foreclosure prevention, to bolster the ability of community banks to lend to small businesses and to help efforts to restore activity in secondary bond markets ..."
***
Gee, I don't know ... do you really think Goldman Sachs would sign off on that?
No, no, no, no. I am seriously considering opting out on my income tax this year. Not all of it, mind you-- just, say, the percentage that goes to bailing out banks & corporations & the U.S. war machine. No joke.
Cicero: "Freedom is participation in power."
Just like these oil/pipeline wars they could extend these bank handouts indefinitely because all the bad paper is still on the books. The TARP was never used to buy it up--that was a ruse to deceive the public. That's why it's specious of Obama to claim he is using TARP money for $200 Billion in additional job stimulus claiming the banks are paying it back faster than expected and are "profitable" again. No one really knows (I doubt even the Fed) how many and how badly the banks are still underwater. Since no effort is being made to ascertain this information, these banks can pretend to be profitable as long as the government is willing to help cover-up their actual debt loads and keep periodically bailing them out. This is a cover-up of unknown proportions just like the guesstimate of $500 Trillion to over $600 Trillion on the derivatives black market.
Even the "profitability" the banks are claiming to show is based on tax-payer subsidized speculation in the market that is heavily focused on dubious derivatives--including credit default swaps that have still never been regulated. This whole TARP nightmare may just be fuel for another, even worse derivatives bubble.
Obama, Geithner, Bernanke and Summers are still playing dangerous shell games and aren't investing enough in creating jobs, raising wages and thereby protecting consumer ssavings and incentivizing demand in order to stimulate the need for new inventory.
metal; I agree with your post!
Eat shit and die Geithner.
Now that's a christmas spirit I can identify with.
"a financial meltdown bigger than the Sept. 2008 event is inevitable. Geithner wants to make sure his Wall Street cronies' wealth accumulation does not miss a beat when the meltdown occurs." -- raydelcamino
I agree with your conclusion. I simply don't see how another meltdown can be avoided! With the next meltdown, though, "we the people' will have already been sucked dry of any resources/cash/investments we once had. I suppose, at that time, the Fed will print even more money for the banksters.
FYI -- I have attended three organized rallies on Wall Street, and, sadly, not many people joined me there. Today, I read that jobless claims came in at 474,000 this past week, ending December 5, 2009. I am thinking of the 11,000 number that has been circulated so widely as jobs lost in the month of October, a number that provoked the Obama administration to declare some success. Of course, the stats must have been "juked." What other possibility is there?
As per usual, the stock market is UP today.
I wonder what the jobless figures are going to look like in Jan. of next year after all of the seasonal retail jobs go down the tubes?
aussidawg: I'm wondering the same thing! I'm also wondering how many more businesses will have to close.
Cicero: "Freedom is participation in power."
Judy Woodruff on the PBS News Hour earlier this week reported that the News Hour conducted its own survey of over 100 large businesses across the country and found that more of them were planning new lay-offs in the coming year than new hires.
Given that both major Parties are just far-Right and slightly less far-Right wings on the same plutocratic globalist planet pillaging machine this is hardly surprising.
To keep that machine humming indefinitely they would have to, first, lower American's expectations to accept that it will be MUCH more difficult to achieve the old American dream of home, car, nuclear family, decent medical care, college education for the kids, vacations now & then, and dignified retirement--and then, second, they would have to maintain existing policy trends indefinitely to ensure that situation becomes permanent. This is so that wage levels can be kept low on a global basis to maximize the profits of the global capitalist ruling elite. "Free trade" helps achieve this by driving indigenous subsistence farmers and fisherman off their land and water resources (so they can be privatized for corporate resource exploitation and extraction) and thereby eliminating their traditional means of supporting their families so they must emigrate to find work. Twelve million of them have flooded into the U.S. since NAFTA and their job for the capitalists here is to intensify the downward pressure on wages along with contrived housing (asset) bubbles targeting the poor and minorities in the U.S. The next looming bubble will probably be the derivatives bubble the banks are using TARP money to inflate now.
What worries me is that the Dimocratic establishment seems to be prepared to keep anywhere from 17% to over 20% (as it worsens next year) of the workforce on an unprecedentedly long unemployment dole with no real intention of either stimulating sufficient private sector job creation or creating outright New Deal type government job programs for what will soon be tens of millions more Americans.
My gut tells me the politicians' owners in the banking and finance inner sanctums (who pull both Parties' strings) are going to run a very treacherous good cop/bad cop ploy combined with persistent propaganda to, first, convince the majority of the public that 17% (plus?) unemployment is the "new norm" and that it's "too risky" to do anything substantive about it (as Paul Krugman thinks they will). After completing the biggest, fastest wealth transfer from the lower- and middle-classes to the richest one-tenth of 1% in U.S. history, the "good cop" Dimocratic "leaders"--whether their sorry asses are kicked out of office in the next two election cycles or not--will be rewarded with FAT lobbyist/speaking/board member gigs and seats on this and that globalist corporatist militarist organization.
Then the other corporatist tag-team of Republicans will be sent in--along with an even more virulent variation of propaganda--to try to convince the majority of Americans that people on the unemployment dole are a disgrace to themselves and the nation: An unaffordable growing class of dependent, lazy welfare queens who will gradually drag down America into socialism or communism or "ghetto culture" or (insert scapegoating label here). They will phase out unemployment benefits as they crack-down more heavily on protests, build privatized labor camp gulags of free labor for dozens of different industries and expand foreign resource wars (with commensurate growth in military enlistments). Options will be limited.
I wouldn't be surprised to see mandatory "public service" work requirements for younger people that are really another form of free labor for various private interests. The only significant GAINFUL economic opportunity for most of them will be work in the domestic Police State or the military (as is already becoming the case). What they will do with older (over 35) unemployed workers with outdated skills is anyone's guess. They may let a generation die out on the dole as they completely fade out unemployment benefits along with Social Security and Medicare. Pensions and workers compensation will go the way of the 8 hour day and the 40 hour week. The younger generations coming along will be far more heavily indoctrinated and coerced than they are today, and shunted into a set of rigid, class-determined occupations, or the prison labor system or the domestic Police State or the military. Real upward mobility within the class structure will come to a slow grinding halt except for only the most talented athletes or best packaged entertainers--or racially correct pols like Obama willing to sell their souls to be faux lower-class heroes and step'n'fetchits for the true capitalist elites in exchange for all the usual political class perks. Basically more of the same system we are already seeing unfold now only to a degree that is a combination of Brave New World (for those who conform) and Orwell (for those who resist). Soma, anyone?
metal: I missed the Judy Woodruff report on PBS, and thanks for reporting here on CD.
I wish I could say that I do NOT agree with your post, but I'm already witnessing evidence of what you describe. Not long ago, I read an article that reported Mayor Bloomberg (I live here in NYC) and Al Gore partnering here in the city on a "green jobs" project -- painting roofs of buildings white. Here's the kicker, though -- the two men are rounding up volunteers to do the work. I have written about this issue several times on several different threads on CD. No doubt, this is the trend. People are angry! However, there seem to be few, if any, leaders who are willing to organize and get out into the streets.
When Penny's opened in NYC, 15,000 people applied for 400 jobs. And, I have read that as many as 1.5 million people are unemployed in the city. In July, I talked to an employee at one of the research libraries here in the city, and he told me that 1/3 of the entire library staff in NYC had just been fired. Everyone lives in peril, asking themselves if he, or she, will be next. BTW, the CEO of the NYC library system, as a public servant, earns $800,000 per year (Katha Pollitt from the Nation).
In NYC, for a few years, unemployment among African-American males has been hovering around 50% -- it's been a dirty little secret that has been played down by the authorities. No doubt, by now, the unemployment rate is even higher. Since I live in East Harlem, I hear their conversations when I walk on the streets. They look for work, but they can't seem to get hired.
A few months ago, I watched a panel discussion on one of the Manhattan Neighborhood channels that featured black men, and they talked openly about how young black men who finish college are funneled into law enforcement because they can't seem to get hired in other fields -- their own serious fields of study. This backs up another of your conclusions.
In 1993, I knew that NAFTA would be a bad deal for all of us, and I was NEVER a Clinton fan. I watched the Mexican economy crash, and all of us witnessed a surge of immigrants coming into the U.S. who needed to feed themselves and their families. I have friends in IT who have been unemployed, for the most part, for years, and can't find good jobs. They lose their jobs to H1b applicants, brought in as cheap labor by the corporations. Many of them continually update their skills, but remain unemployed.
"What worries me is that the Dimocratic establishment seems to be prepared to keep anywhere from 17% to over 20% (as it worsens next year) of the workforce on an unprecedentedly long unemployment dole with no real intention of either stimulating sufficient private sector job creation or creating outright New Deal type government job programs for what will soon be tens of millions more Americans." -- metal
Again, I wish I did NOT agree with you!
Obviously the public has come to enjoy it's perpetual raping.
As if Geithner wasn't bad enough already, now he becomes the economic Rummy for this administration. Having studied even the basics of finance and accounting, I won't be surprised to see this administration do it another 5 times before their next election in 2012.
Tax the uber-wealthy at a 90% rate. In fact, while there's a war going, tax them at over 100%. Let's see how long their damn wars last.
The sad reality is that the uber-wealthy *ARE* the government and they aren't about to raise taxes on themselves.
lord_buckley 1:31 pm - as I'm sure your namesake would understand - there are only two methods any general population has to de-louse itself of richfilth animals - one of which we actually did here. 1) Round them all up - take them to sports stadiums, bar code and imprint them and their spawn, lock into all their accounts and holdings, take everything, cut off their heads and destroy the remains with quick lye and hcl. That's the standard historical model. 2) The 2nd method we actually employed here from 1935 (After Prescott Bush and his co-conspirators failed in the Business Coup of '35) to the early-mid-60's (starting with JFK's tax breaks for his richfilth brethren). Roosevelt's legacy, that has been totally dismantled over the last 45 years, was 91% on earned income over $3-6mn/yr (adjusted up from 1935 $1mn); 53% on unearned income - this is for the richfilth animals who never work a day in their lives and live off their estates and holdings - profits we make for them; and finally 50+% on mega-estates e.g. Rockefeller, Walton, Carnegie, Vanderbilt...et al.
As you can see - they were serious about killing off the Oligarchy and doing it without cutting off their heads. We lost that. We force-fed life back into a social caste that by the mid-60's was NEARLY MORIBUND. But, richfilth oligarchy is the glue that binds our entire society together: Male Supremacy, Gender Slavery, & Constant War. They provide the central cohesive force to keep everybody in their place, e.g. poor, illiterate, and short-lived. That's the life the White Majority chose and to this day - they all want to be one...and live in the lap of luxury forever, and servants and slaves, and nothing is denied because any pleasure can be bought - just for them, and theirs, forever. That's the life the white majority has chose for itself, grinding poverty fed by hopeless dreams of champagne forever...but just for them and theirs - and so they die.
Maybe Geithner is the one Obama tasked with tackling global warming. With his brilliant long-term plans to impoverish over 95 percent of the US population, Timmy is going to really cut down on US greenhouse gas emissions.
"We must not waver in our resolve to ensure the stability of the financial system and to support the nascent recovery that the administration and Congress have worked so hard to achieve,"
If Geithner, the administration and Congress were really concerned about the stability of the financial system for ALL of us, the banksters wouldn't be allowed to give themselves $$Billions in bonuses until a recovery actually takes place. As we can see, however, the money is still flowing upward to the same corrupt vermin that created the problem in the first place.
The transfer of wealth from taxpayers to the super-wealthy will continue until the citizens of this nation decide that the government and its elitist pigs have taken enough from us by way of ponzi-schemes. Corruption and moral decay seem to be the norm. That must change!
This is definitely one of those moments when I just want to get off the grid completely as a way of protest and to not feed the beast.
I'm not going to pretend to know a lot about economics but I do know I'm being squeezed, working a full time and a part time job 7 days a week just to break even on rent, bills, food. You guys can articulate it so much better than I can and I enjoy reading the comments about as much as the articles themselves.
It's clear that America is the playground for the rich. I keep wondering why a lot of people believe that this is the place you come to get rich. We only exist for multinational corporations to separate us from our paychecks. We are born, given a social security number so they can track us and then until death are put on a conveyor belt of spend, spend, spend. Public spaces and damn near everything else is being privatized.
The haves see regular citizens as little more than potential customers, we've got dollar signs on our foreheads at birth. None of these people/corporations/entities appear to have an ounce of loyalty to the United States, as their monies sit in offshore accounts and THEY don't pay taxes on any of it while we are expected to keep them and their lifestyles afloat. While I love the internet, I think we're being encouraged to do too much facebooking and tweeting to notice that our infrastructure is crumbling around us.
Now here comes this corporate welfare extension. It's depressing.
OMG are they asking for more money?!
What unpopular bank bail-out? The banksters love it!
TARP seems to have all the qualities of a sticking plaster. Once applied it can be silly to rip it off, for what really counts, the healing, if it is to happen, goes on underneath it. The problem is that gangrene too thrives in the shelter of a sticking plaster.
The USA shows too many signs of the gangrenous kind. Any fool can see it. Never has a gangrene been so stark. The 'banks' the lobbyists, the political parties, the universities, the religions, the beliefs, a good but newly mad President(see his Nobel acceptance speech), the equally insane utterances of the new commander in Afghanistan, a myriad public servants, the employees of the equally mad corporations-----. God! Where can we stop in this list! The USA is a collection of good people gone crazy, like Obama.
An anti-gangrenous intrusion is desperately needed. Any specialist who neglects to do this is part of the problem. The White House, its witches symbol the Pentagon worn on the cuff or lapel in the form of the Stars and Stripes, and the entire business community in the USA, the USA in short, is this huge collective problem.