Thursday, October 29, 2009

Slight of Hand - Obama/Geithner

Good article about the fraud Obama and Geithner are trying to pull off if the Obama base were only bright enough to figure out how much they are giving away to the TBTF crowd how would their anger play out then? Instead of marching in Chicago they should be marching on the Capitol!

Even as Tim Geithner was boldly lying today on national TV, claiming that he abhors the concept of too big to fail, and condemns moral hazard, behind everybody's back he, together with the entire Obama administration, was trying to pass a law that would shift TBTF from a temporary program into officially canonized law. This is a scandal that has gotten little recognition in most of the MSM: in essence it guarantees that the massive mega banks like Goldman Sachs, BofA, and JPM will take on so much disproportionate risk the next time around (and with a moral-hazard encouraging Federal Reserve as risk regulator virtually guarantees their implosion) that not only will they blow up spectacularly once again, but that their bailout next time around will surely force America, already strapped with trillions of new upcoming debt courtesy of stimulus after stimulus, into sovereign insolvency.

One of the side effects of the TBTF policy is that it is essentially a subsidy of the mega banks at the expense of the smaller, regional ones, as the cost of capital of anyone perceived Too Big To Fail will approach zero due to their implicit guarantee by the US government in perpetuity: an unfortunate side effect of moral hazard becoming a national doctrine. An analysis by the Center For Economic and Policy Research has quantified the funding differential as one of 49 basis points, which translates into a bank subsidy of $34.1 billion per year for all banks with more than $100 billion in assets.

The table below highlights what portion of an institution's total profits is owed to Geithner's and Obama's generosity.

Finish reading HERE

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