Ian Welsh States The Depressingly Obvious

3 comments December 3rd, 2008at 10:36pm Posted by Eli

Every year, it gets increasingly more difficult to believe that our government really gives a damn about ordinary people as anything other than a source of contributions and votes.  Maybe a Democratic president and heavily Democratic Congress will start to change that, but I’m not super-optimistic.

So, let’s summarize: in exchange for 7 billion and some warrants that may never pay back, the government put itself on the hook for 250 billion dollars.  For 20 billion dollars or maybe a bit more, the government could have simply bought out Citigroup.

Now, it would make no sense for a private investor to buy Citi, but if the government has decided that it will never let Citi fail, and it’s hard to read the Citi bailout any other way, then it’s already on the hook for all of Citi’s debts anyway.  And if it is, then there is no downside to owning Citi: it gets all the upside if it turns Citigroup around, after all—not just a few warrants, but the ability to issue stock and pay dividends when it chooses, to itself.  There’s no taxpayer protection like that.

Add that to the fact that the current management of Citigroup is clearly incompetent, and there’s no reason not to take over Citi.  And with Citi under control, one of the world’s largest banks, the government could have used it as a policy instrument, having it lend in the overnight market at the rates the government determines, having it give out credit directly to consumers and businesses at government rates and so on.

So, Citi should have been taken over.  There was no reason not to, and every reason to do so, unless the first concern was to make sure executives kept their jobs rather than that Citi be viable, taxpayers be protected and the credit logjam be broken.

I’m sure that couldn’t possibly be it…

GM’s market cap as of this writing is slightly under 3 billion dollars.  Having GM go under would very likely bring down both Chrysler and Ford, because shared suppliers would go under at the same time.  Job losses would be in the 2 million to 3 million range.  GM going under could quite possibly turn a very bad recession into an actual depression.

Which is to say, in real economic terms, GM is just as much “too big to fail” as Citigroup is.  The question here is not “how much is it going to cost”, the question is “are we willing to let it fail?”  If the government really is, after throwing trillions at the financial industry, and the travesty of Citigroup, then the government is so captured by the financial interests who donate to it that it is no longer capable of looking after the interests of all Americans, but only key donors.

We have seen this again and again, where both parties go along with absolutely terrible, unjustifiable policies solely because their big donors demand it.  This is why telecom immunity was shoved into the FISA update virtually unopposed, why we got draconian “bankruptcy reform,” why we don’t have universal healthcare or a green economy or safe air, water, food, drugs, or workplaces.  Because a few corporations with a lot of money speak far louder than hundreds of thousands, even millions, of ordinary citizens screaming at the top of their lungs.

The number 1 rule of the financial crisis so far has been that the people who caused it must be left in charge of everything.

That about sums it up.

Maybe Obama and the Democrats are willing to buck their big corporate donors for the sake of the country, but I haven’t really seen a whole lot of evidence of it so far.  They have been far too accommodating to Bush’s wishes over the last eight years, even well after public opinion turned overwhelmingly against him.

Prove me wrong.  Show me something.  Please.

Entry Filed under: Blogosphere,Corruption/Cronyism,Economy,Politics,Wankers


  • 1. woody  |  December 4th, 2008 at 11:22 am

    The number 1 rule of the financial crisis so far has been that the people who caused it must be left in charge of everything.

    Which position is still regnant in the councils of St. Barry, the Changer, too.

    Go figger… I coulda swore ally’all voted for “change.” Was this whatcha had in mind?

  • 2. Cujo359  |  December 4th, 2008 at 12:04 pm

    I only voted for him in the general election, woody. He was the least interesting candidate among the Dems, as far as I was concerned.

    And yes, there were moments when I considered voting for Nader again, but frankly a country that can’t give any more coherent thought to who its leaders should be probably deserves to be treated like the bunch of fucking idiots they are.

  • 3. Eli  |  December 4th, 2008 at 12:15 pm

    My preferences, in descending order, were: Gore, Dodd, Edwards, Obama, and Clinton, with Obama getting a slight edge mainly because of charisma and Mark Penn (and the various other creepy people Hillary surrounded herself with).

    Wes Clark might have been in the 3 or 4 spot as well.

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