TARP COPs are back - Report Assesses Treasury Strategy & Actions on Financial Crisis

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The Congressional Oversight Panel has released a new report, Assessing Treasury’s Strategy: Six Months of TARP. First, the $$$:

Over the last six months, Treasury has spent or committed $590.4 billion of the TARP funds. Treasury has also relied heavily on the use of the Federal Reserve’s balance sheet which has expanded by more than $1.5 trillion (not including expected TALF loans) in conjunction with the financial stabilization activities it has undertaken beyond its monetary policy operations. This has allowed Treasury to leverage TARP funds well beyond the funds appropriated by Congress.

The total value of all direct spending, loans and guarantees provided to date in conjunction with the financial stability efforts (including those of the FDIC as well as the Treasury and the Federal Reserve) now exceeds $4 trillion.

The Neil Barofsky TARP inspector general as well as the GAO also confirm the U.S. has spent $3 trillion dollars so far on the financial crisis. (What's a trillion discrepancy among friends?)

Elizabeth Warren overviews the report:

Now see what the Panel has identified as the Treasury's belief on the crux of the financial crisis problem:

One key assumption that underlies Treasury’s approach is its belief that the system-wide deleveraging resulting from the decline in asset values, leading to an accompanying drop in net wealth across the country, is in large part the product of temporary liquidity constraints resulting from nonfunctioning markets for troubled assets. The debate turns on whether current prices, particularly for mortgage-related assets, reflect fundamental values or whether prices are artificially depressed by a liquidity discount due to frozen markets – or some combination of the two.

The report doesn't state the Treasury is wrong. But out here in blog land, experts and us regular folk who have been looking into these Ponzi scheme derivatives know it is simply not a liquidity crisis.

The crux of the report identifies, four key elements of past financial crises resolution successes.

They are:

  • Transparency. Swift action to ensure the integrity of bank accounting, particularly with respect to the ability of regulators and investors to ascertain the value of bank assets and hence assess bank solvency
  • Assertiveness. Willingness to take aggressive action to address failing financial institutions by
    1. taking early aggressive action to improve capital ratios of banks that can be rescued, and
    2. shutting down those banks that are irreparably insolvent.
  • Accountability. Willingness to hold management accountable by replacing – and, in cases of criminal conduct, prosecuting – failed managers.
  • Clarity. Transparency in the government response with forthright measurement and reporting of all forms of assistance being provided and clearly explained criteria for the use of public sector funds.

Let's translate this to blogger terms we all can understand. Kick the bums out (executives), take their ill gotten gains, prosecute them if possible, tell the American people the truth about the (ahem) assets, stop being a Pansie to corporate CEOs and special interests (such as China's desire to protect it's investments), grow a pair, just say no and stop playing accounting games to try to make insolvent banks look solvent.

In Yellowstone National Park, warnings, signs state over and over: Don't Feed the Bears. Someone needs to put signs up all over D.C. which say:

Don't Feed the Zombie Banks

Earlier, COP held a hearing on the history of financial crises (wasn't that a blog post here [sic]).

The Director of the Swedish Financial crisis government response, Bo Lundgren testified. He clearly believes this current crisis can be handled with the Swedish approach. One of his recommendations I found to be most compelling:

In order to limit moral hazard and get public support, it is important to have a stronger approach and deal with the banks firmly, enforcing the principle that losses are to be covered in the first place by the capital provided by the shareholders. If that means that banks must be nationalised, then so be it. They can be privatised again at a later stage.

The entire hearing is below:

I recommend visiting the COP website. They have all sorts of media, information, videos online.

Meta: 

Comments

Re-education camps anyone?

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Good job by the committee, well the majority members anyway. When I read the table of contents, I was immediately saddened and infuriated to see that Neiman and Sununu had to insert their "additional views", like they were writing a dissenting opinion of the Supreme Court. And then they write BS like:

Further, we are concerned that the prominence of alternate approaches presented in the report,
particularly reorganization through nationalization, could incorrectly imply both that the banking
system is insolvent and that the new Administration does not have a workable plan.

Yeah, why should the DFH opinions of Krugman, Stiglitz, et al have to be made part of the official record? Hell, we already have the Washington division of Goldman Sachs to tell us what's going on. Except that they continually obfuscate their plans and spin their deceit.

But nevermind that, they are just being true to their American ideal:

Congress passed the
EESA to protect the American public from financial chaos, and preventing collapse also avoids
the subsequent need for more extensive forms of government intervention in the markets- forms
less consistent with our American experience of democratic capitalism.

And just to show that they have been paying attention, or perhaps get copies of GS Treasury daily talking points, they go on to this:

We affirm that it is entirely reasonable to assume that a liquidity discount is impairing
these assets, and thus that the Treasury has adopted a viable plan based on this valid assumption.
Further, we believe that a viable plan should be given the opportunity to work. Speculation on
alternatives runs the risk of distracting our energy from implementation of a viable plan and
needlessly eroding market confidence. Market prices are being partially subjected to a downward
self-reinforcing cycle that could be exacerbated by unwarranted consideration of more radical
solutions such as nationalization.

This positive assessment of Treasury’s view on the underlying causes of the financial
crisis is not meant to suggest that the housing bubble should be re-inflated. But we do admit to
being confident that the long-term values of mortgage-related assets secured by American homes
remain a good investment.

There's that nasty "N" word, can't be having any of that here in America. And, oh yeah, there's this gem:

On the issue of transparency, specifically in the stress-testing that federal banking
regulators will be performing under the CAP, results should be held confidential. We believe that
government agencies and officials who monitor the industry have a public trust and should be
held accountable for their oversight.

And, finally, they wrap up their entire dissent in the veil of patriotism:

Prosperity is not a zero-sum
game. It is not the case that one person or group necessarily prospers at another’s expense. If we
stand together in investing in our common future, as individual and as corporate citizens, we
continue in our country’s tradition of pragmatic optimism and lay the most enduring foundation
of all for our lasting economic stability.

Can we just pass a constitutional amendment declaring neoliberal economics illegal? These people are in dire need of a serious reality check. I was truly surprised that they see any further need for the committee.

Why I didn't even mention them at all

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I didn't even bother to read their statements. You now they are corporate representatives from their past legislation attempts and rhetoric.

The one doing the service is clearly Elizabeth Warren. I have a funny feeling if she wasn't in such an official capacity we would have seen much stronger conclusions and language.

Sometimes I really hate "equal time" because assuredly some conclusions are better than others. i.e. some are based in statistical fact and others are pure B.S. spin.

You get that all of the time with H-1B guest worker Visas...
complete, not in reality, not by any Academic research metric I am aware, "studies" claiming pure fiction.

I decided I want to publish a paper which announces Kellog's fruit loops are the new super fruit. Come up with a bunch of nonsensical logic as to why this is and also demand a government subsidy for all people on food stamps to buy more fruit loops, a tax break for fruit loops, based on my "research results".

That's about the size of some of this pseudo-intellectual spin crap we get these days.

Just had to vent.

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You're right, Elizabeth Warren is running the show and thank goodness for that. I sensed that the language of the report was toned down quite a bit but her indictment of the Treasury and the Fed was clearly written between the lines.

Rep. Barney Frank - Live Chat - Crooks n Liars

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House Financial Services Chair Barney Frank is over at Crooks and Liars doing a live chat.

Crooks and Liars goes on and on about how Frank "stands up to bullies" referencing to the Bill O-Reilly shout out debacle.

uh, myself, Frank does that on every cable interview and one never gets to the real meat of the issues, such as derivatives, nationalizing some banks, oversight, checks and balances with financial power...

so I don't find him standing up to the bully, I see him only creating more noise in the machine that someone can put up on youtube and have some amusement with...

but in terms of the real issues of the day, well, Frank just shouldn't go on cable news.

Good news is on Crooks and Liars people are asking about the latest COP report, nationalizing banks and so on, the same issues we are.....so it appears people are educating themselves rapidly on global finance, regulation and systems.