Outrage Works: Extra Bailout Funds Out Of Budget

by: Chris Bowers

Tue Mar 24, 2009 at 17:58


Outrage works, again. The $250 billion President Obama had originally included in his budget for extra bailout funds has been dropped from the budget:

Obama also asked Congress to budget for a $250 billion place-holder fund that's intended to pay for a third round of bailout money for struggling banks -- but that notion is dead on arrival in Congress, as Senate Majority Leader Harry Reid (D-NV) acknowledged this afternoon.

"[I]t's not in there, and I have no problem with that," Reid told reporters.

The bonus scandal outrage was almost certainly the final straw that broke the back of the third bailout. Given that it almost killed the second bailout as well, any notion that the bonus scandal was simply a side issue, faux outrage, or a smokescreen should be safely dead by now. It just saved us $250 billion.

Passing more bailout funds through the budget was the only chance Congress would ever approve more. Now, that threat is gone. And it wouldn't have been possible without red-hot, blinding, widespread outrage over the bonuses. Score one for anger!

Chris Bowers :: Outrage Works: Extra Bailout Funds Out Of Budget

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Outrage Works: Extra Bailout Funds Out Of Budget | 41 comments
Isn't that the same money needed for nationalization? (0.00 / 0)

That ain't gonna happen (4.00 / 4)
Geithner and Obama are ideologically opposed to nationalization. Every nobel winner ever could talk about the need to nationalize, and it still won't ever happen.

So, failing that, let's just turn off the spigot altogether.

[ Parent ]
Dude, they just started asking for nationalization authority TODAY (4.00 / 2)
If they are so opposed to the idea they will never, ever do it, why did they just ask congress for the authority nationalize the big banks today

The Obama administration is considering asking Congress to give the Treasury secretary unprecedented powers to initiate the seizure of non-bank financial companies, such as large insurers, investment firms and hedge funds, whose collapse would damage the broader economy, according to an administration document.

The government at present has the authority to seize only banks. [...]

The administration plans to send legislation to Capitol Hill this week. [...]

The administration's proposal contains two pieces. First, it would empower a government agency to take on the new role of systemic risk regulator with broad oversight of any and all financial firms whose failure could disrupt the broader economy. [...]

The government also would assume the authority to seize such firms if they totter toward failure.

As I stated earlier today, they seem to have the same view of nationalization as Wes Clark has of war: only as a last resort.  That is not the same thing as "ain't going to happen".

[ Parent ]
You don't need bailouts for FDIC type authority (0.00 / 0)
as witnessed by the lack of bailouts for the FDIC
[ Parent ]
Absolutely right (0.00 / 0)
As a Quick Hit I posted today referencing Nemo points out: "Assuming the FDIC is actually required to repay the Treasury via the fees it collects, it does only harm all the sound banks to help the troubled behemoths." In other words, the $ for FDIC comes primarily from banks. However, this does beg the question of what would have to be done to prop up the FDIC should the increasingly insolvent banks fail to prop up FDIC.

Save Our Schools! March & National Call to Action, July 28-31, 2011 in Washington, DC: http://www.saveourschoolsmarch...
[ Parent ]
More Reality (0.00 / 0)
Here is Ezra Klein discussing his conversations with administration officials:

Conversations with administration officials have left little doubt that the administration hopes the Geithner plan will fix the banking system, or at least go a long way towards doing so. But they've also emphasized that the Geithner plan is the next step in an evolving process -- it simply spends down preexisting TARP money, after all -- rather than the administration's endpoint. And this legislation giving Obama the authority to nationalize is part of that cautious. The White House hopes the Geithner plan will work. But they're making contingency plans for what to do if it doesn't.

I never claimed nationalization will happen, guaranteed.  I simply say it is in the cards.  But you seem to have gone off the deep end and left reality behind on this one.  

[ Parent ]
Lulz (0.00 / 0)
This article is like a month old.

. (0.00 / 0)
nevermind, clicked the wrong link
[ Parent ]
. (0.00 / 0)
ah i get why i was confused. the 250 billion was never an expenditure in the first place. It was an assumed loss from if we did ask for more bailout money. Taking it out of the budget makes things politically palatable but does dick all to preclude asking for bailout money.
[ Parent ]
Ah yes, dick all (4.00 / 2)
Ah yes, duck all. Well put.

Good luck ever getting more bailout funds through Congress. No matter how nicely they ask for them, there is no chance of ever getting 60 votes in the Senate for this again. Ever.

[ Parent ]
. (0.00 / 0)
If you can't get bailout money through congress, how the hell do you expect to get the upfront money to nationalize?

Nah, this sounds more like budget shit to me. it's the same thing as taking iraq war funding out of the budget (or only putting part of the cost in the budget). That doesn't mean the war is over or the admin isn't going to try to get more money, it just means it isn't in the budget estimate. Which makes the budget look smaller, which makes the president look better. Bush did it all the time.

[ Parent ]
We are not going to nationalize (4.00 / 1)
The bailout plan was announced yesterday. It didn't include nationalization.

There won't be any nationalization. That should be obvious now. I'm just glad the current bailout plans won't get any larger.

[ Parent ]
. (4.00 / 1)
The bailout plan was announced yesterday. It didn't include nationalization.

Why should it? they don't have the power to do it, they don't know which banks to nationalize, and in the mean time of seeking the power to get nationalization, Congress would be a circus full of grandstanding republicans and democrats.

These things aren't turn based, they are done in real time. Nationalization has to be quick and orderly otherwise you could cause bank runs and shareholders to pull out. It won't be quick and orderly if you announce it before you even know if you can do it or who you're going to do it to.

[ Parent ]
Why are you still arguing about this? (0.00 / 0)
I said we aren't going to nationalize. It ain't gonna happen. Argument over.

Arguing over whether we should go through with a policy that we aren't going to go through with is pretty frakking pointless.

[ Parent ]
. (4.00 / 4)
If geithner's plan doesn't work, then we'd have no choice left but nationalization. So either you're implying that it's going to work, or that Geithner is asking congress for the power to nationalize for shits and giggles.

Either way, you aren't exactly making the most compelling arguments in the world

[ Parent ]
So if i say that it could happen... (0.00 / 0)
Is the argument back?
[ Parent ]
Troll? (4.00 / 1)
Wow.  I'm almost tempted to Troll a front pager purely for content.

Obama is right now asking congress for the power to nationalize the big banks.  That doesn't prove he will, but should put an end to the stupid (yes, stupid) "It ain't gonna happen. Argument over."

[ Parent ]
But a push for the authority to nationalize was also announced yesterday (4.00 / 5)
Geithner is asking for reforms in the ability to exercise oversight, specifically including the authority to take over large, international financial institutions.

"Nationalize" doesn't poll well, so they will studiously avoid the term. But the authority they are asking for is all most people mean when they say "nationalize the banks".

[ Parent ]
Irrelevant (4.00 / 2)
Geithner's plan will allow him to raid FDIC funds for bailout money for banks.  He and Summers no longer need Congressional approval for their actions.
Those aren't new funds (0.00 / 0)
It isn't irrelevant. Even if they go through the FDIC, then they aren't appropriating new money for the bailout. And that is a big difference.

The Fed has already given much more bailout money than Congress. While that doesn't make me happy, at least it isn't budget money. And that makes a big difference.

[ Parent ]
Not exactly (0.00 / 0)
The FDIC can do loan guarantees and other stuff like that, but they can't simply dispense cash.

As I understand it.

[ Parent ]
Not exactly (0.00 / 0)
The FDIC can do loan guarantees and other stuff like that, but they can't simply dispense cash.

As I understand it.

[ Parent ]
There's a disconnect here (0.00 / 0)
I recognize that more "bailout" is both politically and economically a road to disaster. However, no more "bailout" implies one of three alternatives: 1) nationalization; 2) a lost decade of zombie banks; 3) printing trillions of dollars. And #2 actually requires more bailout funding eventually - say in 2010.

DeLong estimates $4 trillion of garbage on the banks' books preventing them from lending. The current plans include the Fed creating money to buy $1 trillion and Treasury bribing investors to buy another $500 billion to $1 trillion (I've seen different numbers) that will in turn be purchased by the FDIC if the purchases don't yield profits. That leaves $2-2.5 trillion that needs to come off the banks' books before we can have a functioning financial industry.

Chris - if you don't believe that nationalization will ever happen, but you think that preventing more bailout funding is a good thing, does that imply you are in favor of the Fed printing a total of $3-3.5 trillion? Or do you see some other alternative that I don't see?

Pass regulations first (4.00 / 1)
I'm done talking about handing over more money until we pass new regulations. Let's fix the rules, and then talk about whether or not to give the banks more money.
[ Parent ]
OK - I'll take that strategy (4.00 / 1)
That implies a temporary "no bailout" position - once good regulations are in effect, then we'll deal with the garbage in the financial industry.

But however we deal with the garbage, it's going to cost money up front. Depending on how we deal with it, varying amounts of money will return. Nationalization is probably cheapest in the long run, and the Fed printing money is probably most expensive in the long run.

[ Parent ]
Too late for that.... (4.00 / 1)
...the "outrage" has now tied everyone's hands into the default position of "doing nothing" and railing against banks... none of which creates one job!  Whoopee!  Isn't "populism" grand?

REID: Voting against us was never part of our arrangement!
SPECTER: I am altering the deal! Pray I don't alter it any further!
REID: This deal keeps getting worse all the time!
[ Parent ]
I kept wondering what the hell they were waiting for. (0.00 / 0)
You have to put the plug in the sink before you fill it up with water.   Same thing with trade.  If he was so concerned about jobs, he would be acting to reverse offshoring.  
[ Parent ]
#4 (0.00 / 0)
There is always option #4, a run on the banks and systemic collapse. Great Depression II. I doubt Chris wants that.
[ Parent ]
Nationalization need not be expensive (4.00 / 2)
The costs of bank failure properly should be borne by investors in the bank. Do it that way, and the government will face only some mild (by these standards) operating costs.
[ Parent ]
Stock price (0.00 / 0)
The stock prices are so low today, my understanding is this wouldn't actually generate all that much money.  I'm not sure about bonds.
[ Parent ]
Short answer... (4.00 / 1)
YES

Neither Congress or the Administration, care two hoots about us.  Reasoning with them does not work.

The ONLY thing they understand is "rage"

Keep that in mind when they try to "fix" SS

Keep your wits sharp, (4.00 / 3)
and your pitchfork sharper?

Montani semper liberi
[ Parent ]
Keep your wits sharp Agreed (0.00 / 0)
Anger works for feeling glory, victory and for motivating, not for direction, and not thinking.

--

The government has a defect: it's potentially democratic. Corporations have no defect: they're pure tyrannies. -Chomsky
[ Parent ]
The alternative storyline (4.00 / 5)
There's another storyline that changed the equation over the weekend, which is the new CBO report projecting a bigger deficit than the Whitehouse projections. I wouldn't be surprised if that has a bigger pull on the "centrists" than popular rage, leading to efforts to trim Obama's budget. If all we lose to the fear of deficits crowd is the bailout money, we're in good shape - but we're really in danger of losing the healthcare money and anything that could be characterized as "stimulus" - as well as any chance of future stimulus.
How many times can I put a four on this? #$@%^$# FOUR!!!!! (0.00 / 0)
I wouldn't be surprised if that has a bigger pull on the "centrists" than popular rage, leading to efforts to trim Obama's budget. If all we lose to the fear of deficits crowd is the bailout money, we're in good shape - but we're really in danger of losing the healthcare money and anything

This is my fear exactly. We are driving anger here, and anger is nothing if not blunt. It is the thing least like a scaple, the thing least like thinking. Anger. pffft

Four and four again. And a little of my anger for all the people who didn't sit back and think before sputtering.

We could lose morew than specific ways to stop a house pof cards from meltdown, we could loose every single goddman progressive thing in the budget because the 'moderates' hear the peoples "anger."


--

The government has a defect: it's potentially democratic. Corporations have no defect: they're pure tyrannies. -Chomsky

[ Parent ]
I'll qualify your statement (0.00 / 1)
because the 'moderates' hear the peoples "anger."

I'd say it's really because of Obama's remarkable inability/refusal so far to harness that anger. Maybe I'm wrong that Obama could direct that anger into passing progressive reforms, but since Obama hasn't even tried yet there's no way of knowing.

[ Parent ]
. (4.00 / 1)
Obama built an organizing group out of his calls for dignified political engagement. So I don't think he particularly wants to direct populist anger or be tied to it. Or to put it bluntly, I don't think we can expect the man to bend to something he never needed in the firstplace. There was that little pushback on 60 minutes when he said he won't govern out of anger.
[ Parent ]
If he governs out of fear of us (4.00 / 1)
that would be ok too. His motives are irrelevant to me.

Politics is the art of the possible, but that means you have to think about changing what is possible, not that you have to accept it in perpetuity.
[ Parent ]
I want Obama to do the best possible. (0.00 / 0)
Fear us? Because if we don't like what he's doing we can threaten to stop the Health reform? Or EFCA? Or will we make sure he can't reform the tax code.

I have supported the call for a demand to restructure and decentralize. I am not sure if there is agreement even on that. We could threaten to say he is a sellout if he doesn't agree to which proposal?

Steam is great, but to be useful, it needs a ironing board or a piston or a wheel; a track might be useful.

--

The government has a defect: it's potentially democratic. Corporations have no defect: they're pure tyrannies. -Chomsky

[ Parent ]
Fear us (0.00 / 0)
because we need him to pass EFCA, and reform healthcare so that it serves for people instead of Big Pharma and the insurance companies.

What the last few days have demonstrated is that Obama is on the side of the kleptocrats, not us. We will have to fight for every inch of progress.

Montani semper liberi

[ Parent ]
Power works (0.00 / 0)
Outrage is one way of leveraging power, but its not the only way.  

The other two theories are not about power - that's why (alone, at least) they are lacking.

Compare this episode to the post-election Prop 8 campaign. Sure there was outrage, but there was joy and love too.  It has not have immediate policy impact, but I don't think that means it hasn't mattered.

The similarity is mobilization. It is people deciding that they are going to decide for themselves, not leave it to government or experts or some organization you can just write a check to.

People see the hypocrisy in showering money on this small class of people who created this mess, while they themselves struggle.  Outrage will flame out if its overly personalized - if it focuses just on the AIG bonuses, just on Obama or Geithner.  If it can build into a righteous anger, one that points towards an agenda beyond the outrage of the moment, one that connects are various problems (national security, energy, wages, social insurance, the economy, and on and on) then it can burn for a while.



Politics is the art of the possible, but that means you have to think about changing what is possible, not that you have to accept it in perpetuity.

Outrage Works: Extra Bailout Funds Out Of Budget | 41 comments
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