Privatized profits, socialized losses

by Propagandhi711 Tue Mar 06, 2012 12:57 am

longish but must read article by jesse Eisinger on how banks were able to payout dividends and buyback shares, instead of using those funds to strengthen their balance sheets. the fed reserve went over and beyond objections from FDIC in allowing this to pass.

http://www.propublica.org/article/fed-shrugged-off-warning-let-banks-pay-shareholders-billions

"
Among their reasons: Allowing banks to return capital to shareholders weakened American banks’ ability to withstand a major shock. Whether they are too weak remains debated, but dividends and buy-backs matter. From 2006 through 2008, the top 19 banks paid $131 billion in dividends to shareholders, according to SNL Financial. When the financial crisis hit, the banks were weak in large part because they didn’t have those billions. Indeed, in the fall of 2008, the government invested about $160 billion in the top banks.

Today, the European economic and banking crisis, which was looming when the Fed made its decision, continues to threaten the economy. Unemployment in the U.S. remains persistently high, and the housing market fell almost 5 percent last year, according to CoreLogic, a financial information firm.
"

by Kris Tue Mar 06, 2012 1:31 am

“As
undercapitalized as many of these banks are, allowing them to return capital,
in my opinion, is preposterous. I can’t believe a strenuous stress testing of
their mortgage assets, European exposures and other questionable assets would
allow them to return capital to shareholders,” says Neil Barofsky,
who until March 2011 served as the special inspector general for the Troubled
Asset Relief Program (TARP), better known as the bailout"

>>> I just glanced through the article, but definitely worth a closer read. The above jumped out in the article. The second stress test seems rather questionable as a 'safety and soundness' measure, with the double whammy of all the toxic mortgage paper and the news in Europe going from bad to worse. It is one thing to excuse the pre 2008 modus operandi as being due to the delusion that things would all work out on magically. This time around it seems like a case of repeating the same experiment again, hoping for a different result.

by Propagandhi711 Tue Mar 06, 2012 9:45 am

Kris wrote:“As
undercapitalized as many of these banks are, allowing them to return capital,
in my opinion, is preposterous. I can’t believe a strenuous stress testing of
their mortgage assets, European exposures and other questionable assets would
allow them to return capital to shareholders,” says Neil Barofsky,
who until March 2011 served as the special inspector general for the Troubled
Asset Relief Program (TARP), better known as the bailout"

>>> I just glanced through the article, but definitely worth a closer read. The above jumped out in the article. The second stress test seems rather questionable as a 'safety and soundness' measure, with the double whammy of all the toxic mortgage paper and the news in Europe going from bad to worse. It is one thing to excuse the pre 2008 modus operandi as being due to the delusion that things would all work out on magically. This time around it seems like a case of repeating the same experiment again, hoping for a different result.

goes to show how powerful the bankers really are in this country - you can see that in obama's performance with reform as well.

by Kris Tue Mar 06, 2012 11:16 am

Not to mention the revolving door between the government and the banking industry. I want to read this whole article today. Seems pretty interesting to see the inner workings of the regulatory bodies and for all the talk of independence, how much politics comes into play.

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Privatized profits, socialized losses

Privatized profits, socialized losses

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