The Triumph of Crony Capitalism occurred on October 3rd 2008. The event was the enactment of TARP – the single greatest economic policy abomination since the 1930s or perhaps ever.
Like most other quantum leaps in statist intervention, the Wall Street bailout was justified as a last resort exercise in breaking the rules to save the system. In the immortal words of George W. Bush, our most economically befuddled President since FDR, "I’ve abandoned free market principles in order to save the free market system."
Based on the panicked advice of Paulson and Bernanke, of course, the President had the misapprehension that without a bailout "this sucker is going down." Yet 30 months after the fact, evidence that the American economy had been on the edge of a nuclear-style meltdown is nowhere to be found.
In fact, the only real difference with Iraq is that in the campaign against Saddam we found no weapons of mass destruction; by contrast, in the campaign to save the economy we actually used them – or at least their economic equivalent.
Still, the urban legend persists that in September 2008 the payments system was on the cusp of crashing, and that absent the bailouts, companies would have missed payrolls, ATMs would have gone dark and general financial disintegration would have ensued.
But the only thing that even faintly hints of this fiction is the commercial paper market dislocation. Upon examination, however, it is evident that what actually evaporated in this sector was not the cash needed for payrolls, but billions in phony book profits which banks had previously obtained through yield curve arbitrages which were now violently unwinding.
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1 comment:
It was a scam. Middle class America saw their 401(k)'s stripped clean, their stock and savings stolen, their home equity disappear and the rich bankers got saved by the very taxpayers they ruined. No one went to jail. Now, middle class America is watching their jobs disappear while their homes get foreclosed. But the politicians, who were, and still are, neck deep in this rip-off, now tell us we must "become educated" (quote from Steny Hoyer) about this mess and pay higher and higher taxes and fees, while benefits like SSI and Medicare are reduced. THEIR benefits, however, are NOT affected. All the while, the rich bankers and Wall Street execs reap multi-million dollars salaries and bonuses. BONUSES! No one goes to jail. Middle class America--- how much are you gonna take before you get mad about it??
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