Krugman- Obama's Team Signals It's Taking the Taxpayer Ripoff Route to Saving Our Financial System

Obama's Team Signals It's Taking the Taxpayer Ripoff Route to Saving Our Financial System

By Paul Krugman, The New York Times. Posted January 20, 2009.

Obama's team is talking a whole new economic voodoo: the belief that by performing elaborate financial rituals we can keep dead banks walking. Old-fashioned voodoo economics — the belief in tax-cut magic — has been banished from civilized discourse. The supply-side cult has shrunk to the point that it contains only cranks, charlatans, and Republicans.

But recent news reports suggest that many influential people, including Federal Reserve officials, bank regulators, and, possibly, members of the incoming Obama administration, have become devotees of a new kind of voodoo: the belief that by performing elaborate financial rituals we can keep dead banks walking.

To explain the issue, let me describe the position of a hypothetical bank that I’ll call Gothamgroup, or Gotham for short.

On paper, Gotham has $2 trillion in assets and $1.9 trillion in liabilities, so that it has a net worth of $100 billion. But a substantial fraction of its assets — say, $400 billion worth — are mortgage-backed securities and other toxic waste. If the bank tried to sell these assets, it would get no more than $200 billion.

So Gotham is a zombie bank: it’s still operating, but the reality is that it has already gone bust. Its stock isn’t totally worthless — it still has a market capitalization of $20 billion — but that value is entirely based on the hope that shareholders will be rescued by a government bailout.

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http://www.alternet.org/workplace/121051/obama%27s_team_signals_it%27s_taking_the_taxpayer_ripoff_route_to_saving_our_financial_system/

$3 bux a share today

:mad:

I am FURIOUS over the latest governator move in my state as well.
He allowed Enron to make off with NINE billion dollars and
now we are sinking under the waves with the elderly and
disabled the first to drown.

FUCK the motherfuckers who did this to us.

http://www.dailykos.net/archives/004435.html
"Based on 34 faxed pages of Enron memos, investigative journalist and best-selling author Greg Palast said in a story posted at his site yesterday that Arnold Schwarzenegger was part of a small group that met secretly with Enron CEO and George Bush friend Ken Lay in May 2001. The purpose: to wreck a plan by Gray Davis and Cruz Bustamante to recover $9 billion ripped off by Enron and others in California’s 2000-2001 energy crisis."

Joanne, one of DU's finest contributors to the Economic Forum posted an excellent
thread regarding the wreckage in California here:
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=114x54233
"California controller to suspend tax refunds, welfare checks, student grants - Los Angeles Times

Chiang said he had no choice but to stop making some $3.7 billion in payments in the absence of action by the governor and lawmakers to close the state’s nearly $42-billion budget deficit. More than half of those payments are tax refunds….
“It pains me to pull this trigger,” Chiang said at a news conference in his office. “But it is an action that is critically necessary.”

The payments to be frozen include nearly $2 billion in tax refunds; $300 million in cash grants for needy families and the elderly, blind and disabled; and $13 million in grants for college students…
But California is projected to be $346 million short of the funds it needs to pay all its bills in February. By March, the state would be so far in the red that even continuing to suspend payments would not cover the shortfall. California would be insolvent, making the issuance of IOUs likely."


I think it is surprising that more DUers don't read that forum.
It is one of our best.

And the people in this state should demand the removal of "Ahr-nold" from public office,
along with any others who helped break the bank in California.

BHN

all of this talk about "responsibility" and it seems to me that that means we the taxpayer are going to be asked to tighten our belts while all the while we've been plundered.

and as usual, we are supposed to "eat cake."

I'm suspicious of the "responsibility" clause too...
As wonderful as Obama is, I'm sure he also well
aware that the thieves have no intention of returning the loot
and that not even HE can get it back to the people.

BHN

K&R

at least i have to believe that's what krugman was thinking....