Just saw Geithner's explanation for the new TARP plan. Apparently bank nationalization is a no-go because of the excessive risk taken on by tax payers. Thus the solution to "share" the risk with private investors. So, 100% risk is too much but 95% is just right and it only costs of 50% of the possible returns. Well, I feel better now.

BRAVO!!!

BRAVO!! indeed. It is so maddening to have to listen to pundits regularly parrot this and other economic cliches.

Recommended reading: Bill Greider's 1987 book "Secrets of the Temple," which focuses on the Federal Reserve. Even an economic dumbo like me, after reading that --- and, of course, Dean's blog --- can see how empty and dumb are most media pundits' dribble.

OT: POST AIG'S BOOKS ONLINE, call Pelosi @1-202-225-0100. YOUR, money, YOUR company, YOUR books.

"This insurance policy is enormously valuable and the banks did not have to pay a penny for it."

Not quite true, Dean. I'm pretty sure some campaign contributions had something to do with it...

But the USA have free markets: in those markets banks and corporations are free from effective regulation and are free from rules and are free to run up huge losses.

What the USA markets are not (except for the labor markets of losers) is *competitive*. Competition is managed, and the Treasury decides who gets the Greenspan Put, the Bernanke Swap or the Geithner SIV.

«100% risk is too much but 95% is just right»

it is just right because 3-5% third party interest is enough to satisfy the legal requirement (but wasn't it changes by the SOX act?) for avoiding consolidation, as it is then deemed to be controlled by the third party. Enron used exactly the same tactics: offer a sweet deal to a third party with a 3-5% interest in order to keep their SIVs off balance sheet.

Thank you

Not quite true, Dean. I'm pretty sure some campaign contributions had something to do with it...

Posted by: David Reese

This is correct -- but on the upside, they got an awfully great return on their $5 billion + lobbying / etc funding.

I will play the devil’s advocate even though I hate bailouts because no one else on this board does.

1. Keep in mind in this debate, as your headline implies it is the rich (Joe the plumber) who will pay for the bail out, for the most part the poor are net recipients of tax money. Contrary to Dean’s statement the bailout will be paid through the corporate and income taxes, poor people do not pay income taxes and seldom pay corporate taxes.
2. The reason for the double taxation of corporate profits is that the corporate limited liability creates risk to the overall society. One could surmise that much more has been paid in corporate taxes than losses have been absorbed by the American people.
3. The idea behind the limited liability is that humans are excessively risk averse by nature and so the limited liability is to encourage more risk taking. The theory is that risk taking will lead to less even but greater growth. Risk taking is what the bankers did.
4. It has been said that banks exists to fool customers into thinking that their money is safe even while leveraged to a great degree and thus at great risk. This theoretically is to increasing risk to obtain greater growth. An alternative is 100% reserves for demand deposits and saving accounts would be exchange traded bond funds with values varying minute to minute.

BTW I really hate the S-Corp structure which gives the benefit to the owners without the tax.

The sad think to me about the bailouts is that the crisis would have been an opportunity to get rid of some very corrupt and IMO inefficient companies (most of the Wall Street banks).

Of courses I cannot find an argument against this:

The banks are ardent opponents of free market capitalism.

Maybe we could force all banks to be partnerships.

So, the issue over different types of capitalism that is coming up at the G-20 summit is whether the government exists primarily to redistribute money to the wealthy or to serve some other social end.

Perhaps the above should read: redistribute money from some wealthy people to other wealthy people.

Garrett Hardin's acronym is apt: CCPP: Commonization of costs, privatization of profits.

Bravo, well said. Although I'm not a US citizen, same happens here in Holland where €30 Billion has been spent on crumbling banks like Fortis, ABNAmro and ING.

Where companies such as mine are struggling to get a credit line, these banksters receive cash and guarantees because they're system banks and too big too fail.

It even took months of talking to finally convince the banksters to refrain from their bonusses. It really makes me almost want to become a communist? ;)

It really makes me almost want to become a communist? ;)

It almost makes me want to become a banker! Just kidding.

Here is what I should like to see done in the paper press:

First,publication of the papers by Pikkety and Saez about the extraordinary transfer of incomes to the top--they are available for free on Saez's web site at UC Berkeley.

Second, publish a political economist's explanation to lay folk of the actual mechanism of that transfer, including the role of components of American national mythologies embraced by the working class and the so-called middle and upper middle classes--meritocracy, best and the brightest, etc.

American Style Capitalism: Tax Joe the Plumber to Give Handouts to Robert Rubin

The media are busy perpetuating a myth that the United States has been a beacon of "free market" capitalism.
This is a lie. The United States never had free market capitalism and certainly the system in place over the
last three decades hardly qualifies.

"1. Keep in mind in this debate, as your headline implies it is the rich (Joe the plumber) who will pay for the bail out, for the most part the poor are net recipients of tax money. Contrary to Dean’s statement the bailout will be paid through the corporate and income taxes, poor people do not pay income taxes and seldom pay corporate taxes."

That's nonsense, the middle class pays taxes, and pays and pays, and pays some more. Have you never been middle class, especially in an expensive urban area? I think in Kansas or some such it might be possible to earn a good income and evade taxes but what about in San Francisco. Nope the middle class pays and pays and pays.

Right on, right on, right on!!

But can we please start calling Joe the Plumber by his correct title, which is Joe the Impostor?

The middle class pays and the upper class pays. I would not desribe the middle class as poor.

To say the poor are paying for this a joke and just sounds populist and ignorant.

A description that the American way is to take from the PEOPLE (no class specificed) and squander it on poor economic policy and idiotic social spending is more accurate.

A country that has active government involvement in business activities cannot be considered a free market.

On another note stealing from the rich to give to the poor is still stealing. Being wealthy is not a sign of a crime. Most wealthy individuals got there through hard work and ethical business practices. It seems popular opinion among the masses is that the only reason anyone ever has wealth is because they were born into it or took advantage of someone. That is just not the case.

We need to stop Japanese and Chinese automobile and goods imports for at least 7 years. This is what I believe will give the U.S. the largest economic boost it has ever experienced in 3 decades of failed and simply dumb import export policies doled out by all the administrations since Kennedy and Nixon and existing today. Simply put a 3 to 7 year moratorium on Chinese and Japanese imports of autos and goods into this country and the same on the manufacturing of any Chinese or Japanese goods in the U.S. except motorcycles and recreation vehicles and some imports of Chinese goods around 30 to 50 percent. Or put hefty import taxes on the goods China and Japan import and manufacture in this country to slow them down and raise our economy the U.S. back up economically. What do we import to China or Japan any way nothing at all as valuable as an automobile. Lets do it NOW and forever hold our piece.

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