It's a little weird that reporters are hesitant to clearly spell out what happened. Basically the Fed printed a huge amount of money. Some of that money they used to do what TARP was originally supposed to do, buy up Big Shitpile at inflated prices. Some of that money they lent to banks at basically 0 interest. Of course there were plenty of other things they could have done with 2 trillion bucks, if preserving the executive compensation at megabanks wasn't thought to be crucial for the survival of the economy. They could have dropped it from helicopters. They could have paid off mortgages directly. They could have given it to state governments. They could have bought me a SUPERTRAIN. But, no, they decided that propping up an obviously failed system of financial intermediaries was the important thing, so that's what they did.The emphasis there is mine and I can't emphasize it enough. The ruling elites truly believed that the best way to bring back the economy was to ensure that jackasses like this weren't unduly inconvenienced, the thought being that even though they were the ones who caused the problems, we couldn't possibly do without them. I think this is an important corollary to Too Big To Fail --- Too Important To Fire. TITF.
Uhm, it's not every day you see someone call others illiterate in the same sentence in which he proves himself to be ... literally illiterate. ("Inmemorable" is only a word in Spanish --- and it means "immemorial.")
From the perspective of economic literacy, last week's hearings before the Senate's Permanent Subcommittee on Investigations had to be, well, not memorable, or inmemorable (as infamous is to famous)... The hearings exposed an unnerving ignorance of fundamental principles of market economics by folks who have a hand in remapping rules of finance that will be with us for a while. Flip assertions about what is and is not socially valuable reflect a confusion about our market economy that is as fundamental as knowing that George Washington was the first president of the United States.
"The low level of economic literacy is plaguing financial reform. Reform is dangerous--it produces unintended consequences--if we don't understand the connection between incentives and economic behavior.
Let's look at that shall we? First, he says reform is dangerous because it produces unintended consequences. One might worry a bit more about that if it weren't for the fact that without the reforms the consequences have already been so dire, unintended or otherwise. And indeed, the connection between economic incentives and economic behavior among the Wall Street titans couldn't be more obvious. There is no personal risk to any of them, unlike the people who made bad bets on their suburban tract homes and went bankrupt, or investors who are now proud owners of condo complexes in Florida that are worth ten percent of what they paid for them. These fine Wall Street fellows, on the other hand, are considered so valuable that the only "haircut" any of them took was a temporary deferral of their ill gotten gains. (And oh did they cry about that ...)
"Folks may like to hear that someone else is to blame for the mistakes they made, but everyone knows--including those who bought houses far beyond what they could afford and then walked when the promise of endless capital gains died and including the investors who bought funky financial instruments that enabled the housing bubble out west and in Florida to inflate--that Wall Street isn't the only culprit in the housing debacle.
"Sir, Goldman was no more culpable in the housing debacle than Congress. Because Washington is mostly focused on appeasing (or stoking) political outrage, the financial reform legislation in its present form seems likely to do little to fix the flaws and is heavily focused on changing things that had little to do with the housing debacle."