Wednesday, August 5, 2009

Pampered Banks

Huffington Post


American taxpayers have been footing the bill to put the banks back to health. In addition to the hundreds of billions of dollars given out in TARP money, supposedly to grease the wheel of credit, to provide more loans to business, the Federal Reserves also provided hundreds of billions in loans to the banks at close to 0% interest rate. With trillions of dollars of emergency funding, the banks have returned to profitability, but have done little to put the economy back to recovery. Direct consumer subsidies and loans have done far more stimulating the economy than these bank bail out efforts. Billions sent to AIG went to pay off counter parties, such as Goldman Sachs, to boost their profits. It's time for the Obama Administration to review its strategy when dealing with the banks. It is not sufficient to put these banks back to profitability. It is essential that they are regulated, and be accountable for the assistance they received from taxpayers. It is immoral for taxpayer money to be used for bonus, paid to fulfill contractual terms which would be null and void if it were not for the bail out of the failing and crashing financial system. A fundamental principle of justice is that criminals should not benefit from their crimes. Those who gambled with other people's money and lost, should not benefit from the bail out of their misadventures. They must be held accountable. Pampering the banks, and banking executives is a gross violation of the trust of American taxpayers.


Nobel prize-winning economist Joseph Stiglitz appeared on Yahoo's Tech Ticker recently, and had some pointed words regarding the massive bank bailouts. Stiglitz, one of the bailout's most strident critics, warned that we shouldn't confuse the well-being of the larger economy with bank sector profits.

Fed Chairman Ben Bernanke's reappointment, said Stiglitz, should be the subject of a "national debate." Of the current regime of financial regulators and the billions poured into the U.S. banking sector, Stiglitz said, "Even if you thought their strategy was right, we got a bad deal [as taxpayers]."

He also argued that the Obama administration has still not figured out how the economy will be revived: "There are so many people who think that if we get our financial markets back to health, the economy will recover. It's probably necessary, but it's clearly not going to be sufficient...Even after our banks are repaired they are not going to be lending in the irresponsible way they did before the crisis. We wouldn't want them to."

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