So the major banks intend to game the public-private partnership, borrowing money from the government to bid up each others toxic assets.
Of course, it’s just one of several ways that the bailout can and will be scammed at taxpayer expense.
Amazingly, the government seems to be endorsing this. John Hempton, who is actually a supporter of the Geithner plan, argues that Sheila Bair’s behaviour is criminally corrupt:
She isn’t seemingly oblivious. She is totally captured by JPM and Citi.
After all WaMu was gifted to JP Morgan in a reckless and irresponsible manner and she attempted to gift Wachovia to Citigroup. It should not surprise me that Sheila Bair continues to act as if she is on the take. That represents no change in behaviour.
Recommendation: Indict Sheila Bair if she won’t resign. Indict her now.
Meanwhile, the financial crisis has become to the Obama administration what 9/11 was to George W. Bush — an opportunity to consolidate power in the executive branch, with little input from Congress.
After voting on the $700 billion bailout last November, Congress has had no say in a bailout that’s grown by trillions of dollars.Others have noticed the same thing. Steve Randy Waldman at Interfluidity wondered: Who passed the Geithner plan? (the answer: nobody)
Congress has a right to be angry.
The whole thing is totally void of the kind of transparency and Democratic decision making you might’ve expected from this administration. At least to many of us, it looks like the bailouts are designed to simply restore the old financial order, while letting certain favoured parties like PIMCO reap a windfall (when in fact they ought to be taking a severe haircut).
This undermines the whole effort. At the core of any financial system has to be trust — trust that when you put money with someone, they’ll actually keep it there and give you a proper accounting of what’s happening to it. Without that, the whole business is shot and can become insolvent overnight.So sure, you can boost a company’s tangible common equity or play around with regulations so that their books like tolerable. But by following the path of the Bush administration, Obama and Geithner threaten to undermine the core of the whole system.